Nice Bounce! Now What?

- An early bounce turned into an even bigger, friendlier bounce at the end of the day

- Biggest reason for the gains is the losses that preceded them (momentum/technicals/tradeflows)

- Still following the 2.5 coupon

- Still would like to see better confirmation of a new range with next week's trading (but yes, this is the most promising bounce of this cycle)

- RECORD day for positive reprices

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core PCE Price Index (y/y) 1.5 vs 1.4 f'cast, 1.4 prev

  • Chicago PMI 59.5 vs 61.1 f'cast, 63.8 prev

Market Movement Recap
08:39 AM

Early supportive bounce in Asia with 10yr yields pushed as low as 1.45%.  No major push-back in Europe.  Very narrow in recent context.  Small, positive reaction to tame inflation data at 8:30.  Yields near intraday lows, down 7+bps at 1.458.  MBS happy.  Up 3/8ths at 103-07 (103.22).

10:17 AM

Here we go again.  Almost all of the morning's gains in MBS are now gone.  Bond sellers smell blood in the water?  Maybe.  Too soon to tell.  Both MBS and TSYs are still slightly stronger on the day, but just by a hair in the case of MBS.

12:48 PM

Decent bounce underway, both in Treasuries and MBS.  10yr is back down to 1.475 (-5.5bps), and 2.5 coupons are up a quarter point (up nearly 3/8ths from the lows).  This move is just what's leftover after the rest of the market did what it needed to do by the end of the AM hours.  Volume is way down since then.

02:49 PM

Positive PM momentum continues with both MBS and Treasuries hitting best levels of the day.  2.5 coupons are up almost half a point and 10yr yields are down to levels that would have only been moderately terrifying if we'd seen them on Wednesday (but they look great relative to yesterday!), currently 1.45% in slightly higher volume than before.  There will be a big pop at 3pm ET, and possibly some volatility (normal event for month end at 3pm).