While there was nothing especially memorable about today’s trading action itself, the fact that 10yr yields ended 2.5bps lower despite a core PCE reading of 3.1% is surely worth remembering.  It stands as evidence that the bond market is indeed prepared to accept the transitory inflation narrative.  As such, markets are more free to react to key economic inputs such as next week’s jobs report.  

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core PCE prices (y/y) 3.1 vs 2.9 f’cast, 1.9 prev

  • Consumer Sentiment 82.9 vs 82.9

  • Inflation Expectations
         1yr = unchanged
         5yr = down 0.1%

Market Movement Recap

08:50 AM

Extremely calm and flat overnight as yields traded an “inside day” versus yesterday’s already narrow trading range.  Mixed data in Europe.  No major impact from overseas markets.  Tame reaction to hotter PCE data.  10yr half a bp higher at 1.611 and MBS down 1 tick (0.03) at 103-16 (103.5) in 2.5 coupons.

01:20 PM

Moderate gains lined up perfectly with the NYSE Open–a common theme recently.  This can happen as a result of money manager repositioning and bond-related ETF trading, among other things.  It was worth 2+ bps of improvement in today’s case and we’ve been fairly flat since then at 1.58+ in 10yr yields.  MBS are now 2 ticks higher (+0.06).

02:16 PM

Some weakness at the 2pm “recommended” early close (apparently, not every trader got the memo).  10yr yields rose by nearly 2bps but are still 1bp lower on the day at 1.596.  MBS are unchanged.

02:32 PM

Another quick pop, this time right at the 230pm CME brokertec close.  10yr yields back down to 1.58% and that’s a wrap for today.  MBS popped back up to the highs at 103-19 (103.59).