Strong, Calm Week. Next Week Might Be Different

Saying "next week might be different" is of questionable value when it comes to financial markets.  Every week might be different!  That said, some hold more volatility risk than others.  There was a moderate amount of risk this week, but it waned after the Fed announcement.  Next week is a bit more consequential.  In addition to bringing the biggest economic data of the month, it is also an important week for covid data tracking given where we are in the current wave. Cases should continue to rise and that should continue to insulate bonds against heavy selling, but the current rally is showing signs of maturity just the same.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core PCE Inflation 3.5 vs 3.7 f'cast, 3.4 prev

  • Chicago PMI 73.4 vs 64.6 f'cast, 66.1 prev

  • Consumer Sentiment 81.2 vs 80.8 f'cast
    Inflation Expectations DROP 0.1%

Market Movement Recap
09:05 AM

Stronger overnight, mostly during Asian hours.  Slight extension of gains after PCE data, then a small bounce.  Yields still 2bps lower on the day and MBS are up an eighth.

12:43 PM

Small rally in Treasuries just after 10am (looks more tradeflow-driven than data-driven... MBS didn't follow).  Mostly flat otherwise.  10yr yields down 3.5bps at 1.231 and MBS up an eighth.

03:53 PM

No major change from last update, or at all really.  Month-end was a non-event despite the typical volume surge at 3pm ET.  Lowest weekly and monthly closing yield since January.