Mixed Start, Modest Weakness, But No Major Follow-Through

After a day like Wednesday (one of the top 20 weakest bond market days of the past few decades), one of the top concerns is that the following day will see follow-through selling.  Indeed, there are many examples of such days catalyzing a new trend for several weeks.  Heavy selling in response to CPI data has been a 2 way street with the last two examples being met with resilience.  Today's trading is arguably resilient so far with yields only up 2.5bps and MBS only down a few ticks.

The initial reaction to the as-expected core PPI data was a modest sigh of relief.  The 9:30am NYSE open saw a push back in the other direction, but again, not in an extreme way.

The afternoon brings the last of the week's Treasury auctions at 1pm, and that can occasionally mark a shift in tone in the bond market.  If it does, we wouldn't expect it to be extreme, but it could make for several bps of movement in the afternoon.