MBS RECAP: Gains Remain Intact Through Afternoon; Narrow Range Overall

Bond markets didn't put on much of a show today, but what little there was managed to be enjoyable.  Credit that to the fact that trading levels made it back into positive territory twice and held steady through the close.

Overnight weakness was a factor of European markets and global stock market strength.  The 8:30am CPI data came in just slightly weaker than expected, but bond markets caught a big boost.  This could be a sign or even confirmation that sensitivity to inflation data is increasing as markets consider the Fed rate hike outlook.  The fact that the FOMC Announcement is coming up next week probably factors in to this as well.

Existing Home Sales were stronger than expected at 10am, making the opposite argument for bond markets.  But the weakness never took trading levels beyond opening levels.  By the time Europe closed for the day (Europe was a bit of a drag until then), US bond markets were well on their way to a quiet afternoon trend to the best levels of the day.  MBS ended 2 ticks in the green and 10yr yields were 1bp lower.