Powell Effectively Confirms November Taper Barring NFP Catastrophe

Bonds reacted well to the initial Fed announcement and economic projections, but reversed course during Fed Chair Powell's press conference.  Powell pulled no punches in confirming the likelihood of tapering in November unless the next jobs report were to come in significantly weaker than expected.  While bonds definitely reacted to those comments, the scope of the move was remarkably contained in the bigger picture.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Existing Home Sales 5.88m vs 5.89m f'cast, 6.00m prev

Market Movement Recap
08:41 AM

Slightly weaker overnight as broader market had a risk-on bounce following some news on Evergrande.  Yields were only about 1bp higher, but domestic investors pounced at 8:20am CME open, and we're back in positive territory--barely.

12:28 PM

Modest additional gains in the AM hours, but still range-bound overall.  10yr yield down 1.4bps at 1.314 and MBS up 2 ticks now (0.06).

01:48 PM

No major change from the previous update as we enter the 10 minute countdown to the Fed.

02:14 PM

So far so good after the Fed with yields now 3bps lower at 1.297 and MBS up an eighth of a point on the day (good reaction, but not a huge reaction).

03:12 PM

Quick, moderate selling pressure during Powell press conference as tapering timeline is clarified.  MBS are down 3 ticks (0.09) on the day but Treasuries have clawed back into positive territory after briefly turning negative (down .7bps at 1.321).