MBS Live Commentary: So Much Trade War Drama, But Bonds in a Range

The litany of updates/alerts listed below effectively serves to frame the launch sequence for today's trading.  If you don't care to wade through the minutia, just read the most recent update or simply allow me to paraphrase:

There was some confusion earlier as a Trump tweet apparently pushed back on the WSJ article from yesterday which spelled out changes in US/China tariffs.  But it turns out Trump was referencing a more recent WSJ article from this morning.  Bonds moved back and forth on those headlines, but ultimately began to lead off in a positive direction simply because the finality of yesterday's trade related news seemed to be in doubt as the day began.

Rumors surfaced and were then confirmed of a major Chinese press conference to address the trade deal.  China basically confirmed that both sides had reached a deal, but that it hadn't been signed yet.  Moreover, it was short on detail with respect to China's end of the bargain.  Both sides confirmed a cancellation of the new tariffs that were going to go into effect on Sunday, but the US will keep 25% tariffs on $250bln of Chinese goods and 7.5% on another $120bln. 

This means the September tariffs (15%) are effectively halved (as rumors suggested) in addition to the expected cancellation of the most recently announced tariffs that were scheduled to go into effect on Sunday.

Without signatures on paper and more details in the agreement, markets are feeling like it would be all too easy for things to slide backwards a bit.  That said, current trading levels still recognize the progress.  In other words, after all the hullabaloo of the past 24 hours, yields are back inside the same sideways range we'd been tracking (the narrow one, underneath "ceiling 1" in the chart, which is 1.86%), but definitely at the higher end of that range.