Stunningly Sideways After an Important Fed Day

By the time the Fed announcement rolled around, the financial market was already in a very good position to digest at least a 75bp rate hike and a hawkish message from Powell.  Three cheers to bond traders for that because stocks didn't seem to get the memo (stocks sold off to new multi-month lows).  Perhaps it was that Powell directly compared the upcoming changes in the unemployment rate to "past recessions?"  Sadly (or happily?) we really didn't learn anything new from this Fed day.  The short end of the curve moved to price in the new dot plot and the long end of the curve rallied on Fed credibility (i.e. higher and higher rates eventually hurt the economy and bring inflation down).  MBS were stuck somewhere in between but managed to scrape together a token improvement, albeit one that is meaningless beyond the scope of the past 2 days.

Econ Data / Events
    • Existing Home Sales
      • 4.8m vs 4.7m f'cast, 4.82m prev
Market Movement Recap
08:35 AM

Bonds choppy and sideways in Asia, then quickly (but modestly) stronger at the EU open.  Choppy and sideways since then.  10yr down 3bps at 3.538.  MBS up an eighth at 97-15 (97.47).

11:19 AM

Bit of a back up in Treasuries with 10s now down only 1.5bps at 3.555%.  MBS still up 3 ticks (.09), but off the highs by roughly an eighth of a point.

12:14 PM

Losing some ground now, just pre-Fed jitters.  Nothing specific behind it.  10yr up half a bp at 3.575.  MBS down 2 ticks (.06). 

02:04 PM

First move after Fed is weaker for bonds.  The hike was as expected at 75bps, but the dot plot is the culprit (also as expected).  No additional momentum after the initial sell-off.  10yr up 4bps at 3.608 and MBS down 3/8ths.  

02:45 PM

MBS turning green now, up 2 ticks.  10yr down 3.3bps at 3.534

03:03 PM

Additional gains in MBS and Treasuries now.  Long end still outperforming, but the gains are big enough to bring MBS deeper into positive territory.  4.5 coupons up 10 ticks (.31).

05:43 PM

Late session losses brought MBS back closer to unchanged levels.  10yr yields outperformed due to the shape of yield curve trading (long end doing better).