Big Sell-Off Following Fed Minutes

Even though the bond market thought it knew all it needed to know about the Fed's current mindset, the minutes from the last Fed meeting nonetheless managed to surprise.  They showed a Fed that seemed more eager to remove policy accommodation than was suggested in the official policy announcement.  Specifics include more/earlier rate hikes, more/earlier reduction in the Fed's balance sheet, and less time spent between the end of tapering and the subsequent phases of policy tightening.  

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • ADP Employment 807k vs 400k f'cast, 505k prev

Market Movement Recap
08:18 AM

Flat and sideways overnight with a modest nudge toward weaker levels after ADP data.  10yr up 1bp and MBS down 2 ticks (0.06), but still trying to find liquidity for the day.

10:49 AM

Bonds made it to their best levels before the 9:30am NYSE open.  They flattened out from there and are now moving back toward weaker levels.  10yr yield up 1.2bps at 1.661.  MBS are down just over an eighth of a point.

02:21 PM

Heavy losses after Fed Minutes, but bonds are trying to stabilize.  10yr up more than 5bps to 1.703.  2.5 UMBS down 3/8ths of a point at 101-06 (101.19).