This week has been a bit of a barn for the bond market as 10-year yields fell the fastest since the pandemic began. It’s not too worrying to see the humble weakness creep in on Friday. This could be explained by something as simple as traders leaving short-term long positions to become neutral on the big events of the next week. The most important of these will be the Fed’s announcement on Wednesday (which includes updated economic forecasts and “dots”).

Economic data / events

  • Fed MBS purchases 10 a.m., 11:30 a.m., 1 p.m.

  • Consumer sentiment 86.4 vs 84 f’cast
    1 year inflation expectations decreased by 0.6%
    5-year inflation expectations down 0.2%

Summary of the market movement

09:43 am

flat for most of the nighttime session, then modestly weaker during domestic hours (emphasis on modest). The 10 year yield rose less than 2 basis points to 1.455. MBS has dropped a little more than an eighth point for 2.0 coupons (charts look worse because of roll).

12:54 p.m.

Bonds made a brief head fake towards weaker levels at the start of 11 am but are now moving back to the better levels of the day (still a little weaker from yesterday but very close to the best levels of the week).