Bonds Diverge Over Data Implications

It's been a consistently bad week for the bond market and this morning's data offers little objection.  But the damage is playing out in an uneven way with shorter term yields moving higher much faster than long term yields.  This is to be expected to a large extent due to Fed rate expectations' stronger correlation with shorter-term yields (MBS are somewhere in the middle).  As such, 10yr yields are managing a fairly flat day despite higher PCE inflation, and 2 year yields are up 6+bps.  

Econ Data / Events
    • Core PCE M/M
      • 0.4 vs 0.3 f'cast, 0.3 prev
    • Core PCE Y/Y
      • 4.7 vs 4.5 f'cast, 4.6 prev
    • Durable Goods
      • 1.1 vs 0.7 f'cast, 3.2 prev
    • Durables ex defense/aircraft
      • 1.4 vs -0.1 f'cast, -0.6 prev
    • Incomes
      • 0.4 vs 0.3 f'cast, 0.3 prev
    • Outlays/spending
      • 0.8 vs 0.3 f'cast, 0.1 prev
    • Consumer Sentiment
      • 59.2 vs 63.5 prev
    • 1yr inflation expectations
      • 4.2 vs 4.6 prev
    • 5yr inflation expectations
      • 3.1 vs 2.9 prev
Market Movement Recap
09:52 AM

Slightly stronger overnight, but quickly weaker after AM econ data.  10yr up 1bp at 3.834 and MBS down an eighth.

10:16 AM

recovering after Consumer Sentiment data (lower inflation expectations). 10yr down 3bps at 3.794.  MBS up 1 tick (0.03).

12:41 PM

2 way volatility after the last update.  10s were as high as 3.859 but now back down to 3.824 (roughly unchanged).  MBS are down just under an eighth of a point.