MBS Live Recap: CPI and 10yr Auction Make a Case For a Near-Term Rate Ceiling
CPI and 10yr Auction Make a Case For a Near-Term Rate Ceiling
NOTE: charts look weak this morning despite strong MBS due to THE ROLL. See the 2nd half of the Day Ahead for another useful chart. Bonds started strong thanks to a weak CPI report. Actually bonds were ready to sell today, but CPI reversed the losses to the tune of roughly 3bps in 10yr yields. The 10yr Treasury auction--which might have been today's big market mover if not for CPI--posted unobjectionable stats and bonds went on to hold the day's gains through the 3pm close. With these events out of the way, the ability to hold in the 1.13% range is a vote in favor of a near-term ceiling at the recent highs of 1.19+. MBS underperformed, but rates nonetheless fell to their lowest levels in more than a week.
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Fed MBS Buying 10am, 1130am, 1pm
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Core Annual CPI 1.4 vs 1.5 f'cast, 1.6 prev
Flat to slightly weaker overnight in very quiet trading. Weak CPI at 8:30am sparked a big (relative) rally in both Treasuries and MBS with 2.0 coupon up nearly an eighth of a point on the day now. Just so we have the 'heads-up' in one more place, yes... MBS really are higher even though the chart looks like they aren't, because...
Bonds pulling back a bit, led by EU bond market weakness, a bounce in stocks, and general hesitation ahead of the 10yr Treasury auction at 1pm ET. MBS are up only 2 ticks (.06) now at 103 after being up by 5 ticks (.19) at their best levels. 10yr down 1.3bps at 1.145% vs lows of 1.131% earlier.
Decent stats at the 10yr auction and not much of a reaction. Short-term win. Bigger-picture loss (as it confirms traders are comfortable in this range). More details in the update.
No fuss for bonds, with yields near their lows right through the 3pm CME close. All this despite a bounce back into positive territory for stocks. Powell's reassurance on Fed accommodation may have been a factor, but it's hard to say considering bonds really haven't moved all afternoon.