Bond Rally a Victim of Its Own Success

This morning's economic data was bond-friendly, but not as unequivocally as yesterday's JOLTS data.  The heavy lifting came courtesy of the 1st GDP revision for Q2 with the total dropping to 2.1 from 2.4 and some softening in PCE inflation for good measure.  Bonds turned solidly stronger on the data and then spent the rest of the day loosing a very small amount of ground very slowly.  The net effect is still a victory in the bigger picture, but there were several negative reprices among lenders who'd aggressively passed along recent market improvements.  That aggression proved to be too fragile even for what could only be considered to be a modest pull-back in bonds. 

Econ Data / Events
    • ADP
      • 177k vs 195k f'cast, 324k Prev
    • GDP, Prelim (1st Revision)
      • 2.1 vs 2.4 f'cast, 2.0 prev
    • GDP, Core PCE
      • 3.7 vs 3.8 f'cast/prev
Market Movement Recap
08:39 AM

GDP got bonds back to unchanged (or better). 10yr down .4bps at 4.116.  MBS are a tick or two from unchanged, but should also turn slightly green momentarily as liquidity improves.

01:24 PM

Modest additional gains in AM hours and flat since then.  10yr down 1.8bps at 4.102.  MBS up an eighth. 

03:50 PM

Weakest levels since AM data with MBD down 2-3 ticks (.06-0.09) and 10yr yields still down 0.4bps at 4.116, but up 3bps from the lows.