Fed's Salty Dots Rock Bonds

As feared/anticipated, today was all about the "dots" (the dot plot that shows Fed members' views of the Fed Funds Rate over time).  Even though Powell reminded markets, yet again, to take the dots with a big grain of salt, the sell-off was swift and severe for bonds.  Powell's press conference did little to push back against the weakness and bonds moved right back to their worst levels of the day after Powell was done.  There's just no other way for the Fed to say they're getting closer to tapering, and no other way for the market to react.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Housing Starts 1.572m vs 1.630m f'cast
    Building Permits 1.681 vs 1.73m f'cast

  • Import prices 1.1 vs 0.8 f'cast
    Export prices 2.2 vs 0.8 f'cast

Market Movement Recap
08:49 AM

Barely weaker in Asia.  Barely stronger in Europe.  Unchanged after early US econ data.  Trading levels perfectly flat with 10s at 1.487 and 2.0 UMBS at 100-30 (100.94).

02:13 PM

Bonds blasted by Fed announcement.  Specifically, the dots.  Read more HERE.

03:44 PM

The weakness leveled off during Powell's press conference, but we never got an impressive recovery.  Trading levels have been heading back to their worst levels since Powell finished.  10yr yields are up 8bps at 1.57% and 2.5 UMBS are down half a point.