Bonds Surprisingly Willing to Rally on Fed Comments

The only notable market mover for bonds was a rather basic and obvious comment by Fed's Waller.  In not so many words, he said that there's a good argument for the Fed to cut rates if inflation keeps falling for several more months.  That puts a March rate cut on the table, quite easily, assuming conditions are met. Fed Funds Futures have already been entertaining such possibilities and other Fed speeches have laid out similar logic, but bonds were nonetheless willing to treat this example more seriously.  The 7yr Treasury auction pushed back against the gains, but the bulls stayed in control with 5bps of improvement in 10yr yields at the 3pm close.

Econ Data / Events
    • FHFA Home Prices
      • 0.6 vs 0.4 f'cast, 0.7 prev
    • Case Shiller Home Prices
      • 0.2 vs 0.3 prev
    • Consumer Confidence
      • 102 vs 101 f'cast, 102.6 prev
Market Movement Recap
09:15 AM

At the weaker end of a narrow, sideways range overnight.  MBS down an eighth and 10yr yields up 2.4bps at 4.416.

11:03 AM

Best levels of the day after Fed's Waller comments.  10yr down 3.5bps at 4.357.  MBS up 2 ticks (.06).

03:36 PM

Some push-back after 7yr auction, but it was more than erased by the 3pm CME close.  10yr down 5.4bps at 4.338.  MBS up 3/8ths.