Bonds Ready to go Big in Either Direction

If you only had 1 day per month to allocate to watching the bond market and getting a sense of rate momentum, Wednesday, May 15th would be that day.  Last month would have been April 10th.  And here's the rest of the list: https://www.bls.gov/schedule/news_release/cpi.htm.  In other words, it has been and continues to be all about CPI.  Today's PPI appetizer left the bond market hungry for the main course.  A big miss was offset by revisions and a favorable distribution of internal components.  Wednesday is anyone's guess in terms of directionality.  All we know is that the size of the potential reaction is as big as it gets when it comes to scheduled economic data.

Econ Data / Events
    • Core m/m PPI
      • 0.5 vs 0.2 f'cast
      • last month revised to -0.1 from +0.2
    • Annual core PPI
      • 2.4 vs 2.4 f'cast/prev
Market Movement Recap
08:40 AM

Inconsequential strength ahead of PPI data.  Initially weaker after the data, but recovering now.  10yr down 0.4bps at 4.485.  MBS up 1 tick (.03).

10:12 AM

Additional strength at 9pm after OPEC headlines and fairly flat since then.  10yr down 2.6bps at 4.463.  MBS up 3 ticks (.09).

02:51 PM

Slow, steady gains all day.  MBS up 6 ticks (.19) and 10yr down 4.4bps at 4.445