MBS Live Recap: Big Miss in Philly Fed Index Pushes Yields Lower

Grandparents will always have at least a few stories about "the way things used to be."  Those old ways may seem inefficient, strange, wonderful, or all of the above to the younger generation.  For market watchers, the generational divides aren't measured in 2-3 decades but rather 2-3 years (and sometimes 2-3 days!).  

With that in mind, our market-watching forebears have stories of this stuff called "economic data" that was released on a set schedule.  When the data was released, bond would often react predictably.  For example, data that suggested economic weakness would help bonds and vice versa.

It turns out economic data is still a thing!  It just hasn't been on the current generation's radar, apart from a few key exceptions like Nonfarm Payrolls and CPI.  But today's Philly Fed Index hearkened back to that bygone era were other 2nd tier reports mattered.  

Part of the reason for this throwback was the size of the "miss" combined with the most recent ceiling (seen in the previous report).  Taken together, they suggest some small risk of an economic shift (as discussed in the Day Ahead).  This helped bonds extend a rally that was already in the works from the overnight session.  Gains were held without much fanfare, but they never challenged yesterday's stronger levels.  The net effect is yet another day of consolidation in the middle of the range set by Italian volatility of late May.  Bottom line, we're still waiting for that consolidation to break, but at slightly better levels than yesterday.