Bonds Bolstered by Big Swings in Inflation Data and Expectations

US bonds found several sources of inspiration overnight in the form of European inflation data.  The biggest move followed a sharp decline in German inflation, but sellers struck back after Spain posted the highest numbers since 1985.  Buyers said "Spain?  Really?" as they bought more bonds following a second inflation release from Germany--also cooler than expected.  EU bonds rallied hard into the close, dragging US bonds with them.  The latter led at times due to month-end tradeflows and reactions to Fed Chair Powell as he spoke at the Sintra conference.  

Econ Data / Events

  • GDP Q1 Final: -1.6 vs -1.5 f'cast, -1.5 prev

Market Movement Recap
08:43 AM

stronger overnight on German inflation data.  No reaction to US GDP data, but generally pushing back on overnight gains.  10yr down less that 1bp and MBS down 2 ticks (0.06).

10:02 AM

Some 2-way volatility surrounding central banker comments at Sintra.  10yr down 2.8bps at 3.149 and MBS up 3 ticks (.09). 

12:31 PM

Stronger gains over the past 2 hours, now leveling off with 10yr down just under 7bps and MBS UP 6 TICKS (.19)

03:41 PM

Mostly sideways since EU close, but MBS have tightened during that time with 4.5 coupons currently up 3/8ths at 100-01 (100.03).   10yr yields are at lows of the day down 8bps at 3.097.