Incidental Weakness Today, But Let's Focus on The Bigger Picture

Bonds tried to stage a mid-day rally, but ended up sliding into moderately weaker territory in the afternoon.  There were no clear catalysts in terms of economic data or news headlines, but the usual suspect before a 3-day weekend is tendency for traders to close positions that are more exposed to risk.  Bets on rates breaking into a lower portion of the range would indeed be somewhat risky given that they weren't able to accomplish that in Thursday's post-CPI rally.  In the bigger picture, that dividing line (roughly 3.40% in terms of 10yr yields) could serve as a useful line in the sand that lets us know when the bond market is more willing to shift gears and commit to the longer-term downtrend in rates--the one that hopefully began in early November.

Econ Data / Events
    • Import Prices
      • 0.4 vs -0.9 f'cast, -0.7 prev
    • Export Prices 
      • -2.6 vs -0.5 f'cast, -0.4 prev
    • Consumer Sentiment
      • 64.6 vs 60.5 f'cast, 59.7 prev
    • 1yr inflation expectations
      • 4.0 vs 4.0 prev
    • 5yr inflation expectations
      • 3.0 vs 2.9 prev
Market Movement Recap
09:32 AM

Modestly weaker overnight in decent volume.  10yr up 2bps at 3.465 and MBS down a quarter point.

12:26 PM

modest gains into the 11am hour, but losing ground heading into the noon hour.  Currently down 3/8ths in MBS at the lows of the day.  10yr yields are up 3bps at 3.474.

02:19 PM

Treasuries continuing to weaken into the close.  MBS doing a better job of holding steady, currently down 10 ticks (.31).  10yr yield up 6.7 bps at 3.511.