MBS Live Recap: Limited Reaction to Powell Testimony; Stocks

Fed Chair Powell fielded questions from the Senate Banking Committee today as a part of the 2-day semi-annual congressional testimony often referred to as the Humphrey Hawkins address.  These testimonies have plenty of street cred based on past examples where they've caused big market movements.  The difference between then and now is that markets don't have much to learn from the Fed.  In other words, there's not much room for off-the-radar surprises.

Today's market reaction bore that out.  A few bond bulls were positioned for Powell to say something dovish.  When he didn't, there was a quick, shallow, negative reaction, followed by a sideways grind that kept longer-term bond near unchanged levels.  Shorter-term bonds continued to lose ground, because that's what shorter-term bonds do when the Fed remains steadfast in their determination to hike the shortest-term rate.  Even this wasn't much to write home about.

The lion's share of the day's movement was seen in the stock market--so much so that we can safely assume some "asset allocation" pressure on Treasuries.  More simply put, some of the early Treasury weakness can be chalked up to the notion of "selling bonds to buy stocks."  By the end of the day, bonds were still very much inside the same range that's been intact since June 27th.