Small, Defensive Shift Heading Into The Weekend

The highest core inflation in decades proved to be no big deal this morning.  In fact, bonds rallied.  Unfortunately, that set up for a technical selling opportunity as traders pared long positions heading into the weekend.  The selling stalled right at the 1.53% technical level in 10yr yields.  We'll hope that ceiling continues to hold and we'll send out another alert if it doesn't (provided MBS are following suit).  

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core PCE y/y 3.4 vs 3.4 f'cast, 3.1 prev

  • Consumer Sentiment 85.5 vs 86.5 f'cast, 86.4 prev
    1yr inflation expectations down 0.4% from May
    5yr inflation expectations down 0.2% from May

Market Movement Recap
08:42 AM

Stocks and bonds both popped modestly stronger after as-expected PCE data.  Most of the rally has been retraced in bonds, but 10s are still down 1.4bps at 1.485 and UMBS 2.0s are holding gains of 2 ticks (0.06).

10:23 AM

The low yields seen after PCE made for a good selling opportunity in bonds heading into the weekend.  10s are up half a bp now at 1.505 and 2.0 UMBS are unchanged at 100-24 (100.75).  

11:44 AM

More serious selling heading into the weekend and the 11am hour, but 10yr yields bounced almost perfectly at the 1.53% level. MBS are outperforming nicely for now.  If 1.53% breaks, we could see another flush of weakness.  If it holds, the week is over.