Bonds Tried (And Failed) to Sustain Post-Powell Rally

After much anticipation and defensive positioning, the bond market was finally able to hear from Powell in a less formal setting this afternoon--and importantly, AFTER last week's jobs report.  The initial reaction was positive.  Powell said that while the jobs report was great, it wouldn't have changed anything in his view.  This was worth a reaction rally, but not a sustained move.  If yields aren't falling, they're rising, so they moved back up to the highs of the day.  Fortunately, the weakness wasn't/isn't too onerous.  Unfortunately, the previous two days were a bit onerous and 10yr yields are now at their highest levels in about a month.

Econ Data / Events
    • Trade Gap
      • -67.4 vs -68.5 f'cast, -61.0 prev
Market Movement Recap
08:33 AM

Mostly sideways overnight in quieter trading.  Some weakness when EU markets came online.  10yr up 1.5bps at 3.659 and MBS unchanged.  Waiting on Powell.

11:16 AM

Sideways to slightly stronger ahead of Powell's chat with some chatter regarding short-covering.  10yr down 1.7bps on the day at 3.627 and MBS up just under an eighth of a point.

12:25 PM

Weakest Levels of the day ahead of Powell.  MBS down 2 ticks and 10yr up 1.1bps at 3.655

12:53 PM

Stronger during Powell's Q&A (read more on that HERE), but losing some ground after a weak 3yr Treasury auction.  10yr down 1.1bps on the day at 3.632 and MBS up an eighth of a point after being up more than a quarter point at the highs. 

01:36 PM

Back into weaker territory as momentum shifts post-Powell.  The weak 3yr auction isn't enough to explain what we're seeing (10yr selling faster than 3yr).  That leaves us to conclude that the shift in yields corresponds with a shift in tone from Powell (more here).  10s up 1bp at 3.653.  MBS still higher on the day, but down a quarter point from highs. 

03:16 PM

The afternoon's movement hasn't been extreme, but slightly weaker nonetheless.  10yr yields are up 3.4bps at 3.677 and MBS are down 2 ticks (0.06) in 5.0 and 4.5 coupons (the latter being much less relevant than they were 3 days ago).