NOTE: charts look weak this morning despite strong MBS due to THE ROLL. See the 2nd half of the Day Ahead for another useful chart.  Bonds started strong thanks to a weak CPI report.  Actually bonds were ready to sell today, but CPI reversed the losses to the tune of roughly 3bps in 10yr yields.  The 10yr Treasury auction--which might have been today's big market mover if not for CPI--posted unobjectionable stats and bonds went on to hold the day's gains through the 3pm close.  With these events out of the way, the ability to hold in the 1.13% range is a vote in favor of a near-term ceiling at the recent highs of 1.19+.  MBS underperformed, but rates nonetheless fell to their lowest levels in more than a week.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core Annual CPI 1.4 vs 1.5 f'cast, 1.6 prev

Market Movement Recap

08:50 AM

Flat to slightly weaker overnight in very quiet trading.  Weak CPI at 8:30am sparked a big (relative) rally in both Treasuries and MBS with 2.0 coupon up nearly an eighth of a point on the day now.  Just so we have the 'heads-up' in one more place, yes... MBS really are higher even though the chart looks like they aren't, because...

11:12 AM

Bonds pulling back a bit, led by EU bond market weakness, a bounce in stocks, and general hesitation ahead of the 10yr Treasury auction  at 1pm ET.  MBS are up only 2 ticks (.06) now at 103 after being up by 5 ticks (.19) at their best levels.  10yr down 1.3bps at 1.145% vs lows of 1.131% earlier.

01:21 PM

Decent stats at the 10yr auction and not much of a reaction.  Short-term win.  Bigger-picture loss (as it confirms traders are comfortable in this range).  More details in the update.

03:19 PM

No fuss for bonds, with yields near their lows right through the 3pm CME close.  All this despite a bounce back into positive territory for stocks.  Powell's reassurance on Fed accommodation may have been a factor, but it's hard to say considering bonds really haven't moved all afternoon.