The highest core inflation in decades turned out to be no big deal this morning. Indeed, bonds rebounded. Unfortunately, this offered a technical sell opportunity as traders reduced their long positions over the weekend. Sales stagnated right at the technical level of 1.53% with 10-year returns. We hope the cap continues and send another warning if it doesn’t (assuming MBS follow suit).
Economic data / events
Fed MBS purchases 10 a.m., 11:30 a.m., 1 p.m.
Core PCE y / y 3.4 vs 3.4 f’cast, 3.1 prev
Consumer sentiment 85.5 vs 86.5 f’cast, 86.4 back
1-year inflation expectations down 0.4% from May
5-year inflation expectations down 0.2% from May
Summary of the market movement
Both stocks and bonds rose slightly more on the expected PCE data. Most of the rally has been traced in bonds, but 10’s are still down 1.4bps to 1.485 and UMBS 2.0 is holding gains of 2 ticks (0.06).
The low post PCE yields offered a good selling opportunity for bonds over the weekend. 10’s are now up half a bp at 1.505 and 2.0 UMBS are unchanged at 100-24 (100.75).
More serious sales are on the weekend and into the 11 am, but 10-year returns rose almost perfectly to the 1.53% level. MBS are doing well at the moment. If 1.53% breaks, we could see another period of weakness. If it holds up, the week is over.
MBS pricing overview
The price shown below is delayed, please refer to the timestamp below. Real-time prices is available through MBS Live.
103-08: + 0-01
|Prices from 06/25/21 11:56 am|
Today’s reprice notifications and updates
11:00 : WARNING ISSUED: Negative reprice risk increases
10:51 a.m. : WARNING ISSUED: Treasuries at the weakest level, MBS outperforms
8:38 a.m. : A little stronger according to inflation data