Nice Recovery Today, But Is It a Trap?

If the Fed is doubling down on its inflation goals, it makes sense for bonds to be afraid--at least a little bit.  But with today seeing yields hold the same ceiling as yesterday, are we already in a position to ask "was that it?"  Or are markets just waiting to sell more bonds in the week ahead?

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Core Annual PCE Inflation 1.3 vs 1.2 f'cast, 1.1 prev

  • Chicago PMI 51.2 vs 52.0 f'cast

  • Consumer Sentiment 74.1 vs 72.8 f'cast

Market Movement Recap
08:24 AM

Bonds added to yesterday's weakness during Asian trading hours, but found their footing and pushed back into positive territory in the European trading session.  No major volatility on either account.  10yr down 1.5bps to .739.  2.0 UMBS beginning up 3 tick.

10:38 AM

Bonds have been improving slowly and steadily throughout domestic trading hours, generally moving in tandem with stock market weakness.  MBS now up 6 ticks (.19) and 10yr yields down 3bps to .721.

01:51 PM

After hitting the strongest levels around 1230pm, bonds are quickly back to the weakest levels.  Granted, the trading range is narrow, but it's unpleasant all the same.  No overt motivations.  Just Friday afternoon traders trading on a month-end Friday afternoon.

04:31 PM

And we're back... not quite to the best levels of the day, but well off the lows heading into the close.  Very little correlation with any potential market movers this afternoon, but both stocks and bonds began to improve just after 2pm ET (a time we often associate with random movements with increased participation among day traders and algorithms).