Today’s trade itself wasn’t particularly memorable, but the fact that 10-year returns were 2.5 basis points lower despite a core PCE of 3.1% is certainly worth remembering. This is proof that the bond market is indeed ready to accept the passing inflation narrative. As a result, markets can respond more freely to key economic inputs like next week’s job report.

Econ data / events

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

  • PCE core prices (year-on-year) 3.1 versus 2.9 f’cast, 1.9 prev

  • Consumer sentiment 82.9 vs 82.9

  • Inflation expectations
    1 year = unchanged
    5 years = minus 0.1%

Market Movement Review

8:50 a.m.

Extremely calm and flat overnight as yields traded an “inside day” versus yesterday’s already tight range. Mixed data in Europe. No significant impact from overseas markets. Tame response to hotter PCE data. 10 years up half a basis point at 1.611 and MBS up 1 tick (0.03) at 103-16 (103.5) in 2.5 coupons.

1:20 p.m.

Moderate gains were perfectly in line with the NYSE Open – a hot topic. This can be done through repositioning money managers and trading ETFs related to bonds, among other things. In the present case it was worth more than 2 basis points improvement and since then we’ve been pretty flat at 1.58+ in 10 year yields. MBS are now 2 ticks higher (+0.06).

2:16 pm

Some 2pm weakness “recommended” an early close (apparently not every trader received the memo). 10 year yields were up nearly 2 basis points but are still 1 basis point lower on the day at 1.596. MBS are unchanged.

2:32 pm

Another quick pop, this time right at 23:00 CME Brokertec Close. 10 year return dropped back to 1.58% and that’s a wrap for today. MBS returned to highs at 103-19 (103.59).