Bonds Recover as Friendly Powell Trumps Inflation Data (sort of...)

Producer prices surged in this morning's report at the same time that Powell's prepared remarks were released for this afternoon's congressional testimony.  The subsequent improvement in bonds makes it tempting to credit Powell's speech for the victory.  Powell certainly did no harm as he maintained the same stance seen in all recent communications but it's important to note that more than half the gains were intact by 8:30am.  In retrospect, yesterday is looking more and more like "supply indigestion" for bonds, and today could thus be seen as a return to the prevailing baseline (apart from yesterday afternoon, 10yr yields have traded a very narrow range between 1.33 and 1.37 for 4 straight days).

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core PPI 5.6 vs 5.1 f'cast, 4.8 prev

Market Movement Recap
08:39 AM

Somewhat stronger to start the overnight session, flat during Asian hours, 2-way volatility erring toward strength in Europe, and now early domestic trading bringing bonds to stronger levels.  10yr down 4.4bps at 1.373.  UMBS 2.0 up 6 ticks (.19).  No reaction to PPI, but Powell comments aren't hurting.

12:48 PM

No real drama so far.  Moderate gains into 10am and leveling off slightly since then.  UMBS 2.0 still up more than a quarter point and 10yr yields down nearly 5bps to 1.37%.  

04:09 PM

Powell's testimony has been over for more than an hour now and bonds are still in the same gradual rally trend that started in the overnight session.  Looks like yesterday was just a hiccup in the market's ability to digest Treasury auction supply and today has marked a return to prevailing levels (currently 1.35% in 10yr yields and +3/8ths of a point in MBS on the day)