Just Enough of a Rally to Keep Things Interesting

Coming into the day, we were pondering the fate of this week's friendly little correction.  Rates had done a good job of pushing back against last week's spike, but was that destined to be an example of a 3-4 day push that ends with the resumption of broader rising rate momentum?  It was easier to be afraid of the rising rate trend earlier in the trading day when yields refused to go anywhere near yesterday's lows.  But slow, steady gains gave way to a stronger rally in the afternoon.  Is it strong enough to get optimistic about additional gains?  

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • PPI m/m ..............0.2 vs 0.4 f'cast, 1.0 prev
    Core PPI y/y..........8.3 vs 8.0 f'cast, 7.9 prev
    Jobless Claims......230k vs 200k f'cast, 207k prev

Market Movement Recap
09:31 AM

sideways to slightly weaker overnight, then stronger heading into domestic hours.  Weaker month-over-month PPI was a consideration, as were comments from Fed's Harker on balance sheet normalization timeline.  10yr down 2.3bps at 1.729 and 3.0 UMBS up 1 tick at 102-19 (102.59).

11:13 AM

A bit of weakness after the 9:30am NYSE open, but bonds found support early in the 10am hour.  Trading levels are now back in line with the previous update.

02:42 PM

Best levels of the day for Treasuries with 10yr yield down 4bps at 1.711.  MBS underperforming significantly with 3.0 coupons up only 1 tick (0.03)