Fear of The I-Word

Today's 5yr TIPS auction met with heavy demand for inflation protection.  While that didn't move markets at the time, it nonetheless underscores the heavy inflation concern driving traders to flatten the yield curve and move up estimated Fed rate hike timing.  Indeed, Fed Funds Futures are now pricing in the first hike by June 2022.  MBS underperformed 10yr yields, but kept better pace with 5yr Treasuries.  Data had no impact as the market traded largely on momentum, technicals, and deal-related tradeflows (i.e. corporate bond issuance).

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims.... 290k vs 300k f'cast
    Philly Fed............ 23.8 vs 25.0 f'cast
    Existing Sales 6.29m vs 6.09m f'cast
    Leading Indicators ...0.2 vs 0.4 f'cast

Market Movement Recap
08:36 AM

Stronger at first in overnight session, then weaker on booster trial data.  Bouncing back early with 10yr up only .4bps now at 1.664 and 2.5 UMBS down 2 ticks (0.06) at 102-10 (102.31).

12:25 PM

Additional losses heading into the 10am hour, then a brief attempt to recover before moving back toward the lows of the day (in PRICE).  2.5 UMBS down just over an eighth of a point at 102-08 (102.25).  10yr yields up 1.1bps at 1.671.