Big Mystery Sell-Off, Not CPI or 30yr Auction or Fed Speakers

Today was CPI day and bonds lost a lot of ground.  So was CPI to blame?  No... CPI was actually pretty much in line with expectations and bonds traded sideways for the next few hours.  Then the Fed's Mary Daly said the Fed has "more work to do on inflation."  Did she spook bonds? Not really... There was a bit of weakness surrounding her comments, but yields clearly stabilized ahead of the 30yr auction.  Big selling followed the 30yr auction, so what that the market mover? No... That selling didn't begin until almost 20 minutes after the auction.  Even then, the auction stats themselves were right in line with prevailing averages, so there was no justification in the auction details (never mind the fact that 7yr Treasuries had a worse day than 30s).

Econ Data / Events
    • Core CPI m/m
      • 0.2 vs 0.2 f'cast, 0.2 prev
    • Core CPI y/y 
      • 4.7 vs 4.8 f'cast, 4.8 prev
    • Jobless Claims
      • 248k vs 230k f'cast, 227k prev
Market Movement Recap
08:50 AM

Moderately stronger overnight, and volatile/2-way trading in a narrow range after CPI. 10yr down 2.4bps at 3.992.  MBS up 5 ticks (.16).

11:47 AM

Into negative territory on gradual, low volume selling led by Europe.  10yr up 0.1bps at 4.017.  MBS down 2 ticks (.06).

01:23 PM

Still weaker despite early afternoon recovery attempt.  MBS down an eighth.  10yr up 2.9bps at 4.045

02:56 PM

Sell-off intensifies.  10yr up 6.8bps at 4.084.  MBS down just over 3/8ths.