Bond Markets Hold Overnight Gains After Morning Data
After weakening microscopically for the first few hours of the overnight session, bond markets were soon left with only reasons to rally. Asian markets took off in bond-friendly directions as equities sold (talk of Japanese fund managers reducing exposure to stocks both foreign and domestic) and the Yen soaked up more safe-haven demand.
The European session was supportive as well with lower than expected inflation in the Eurozone and weak Retail Sales in Germany. Add to that an average amount of month-end extension buying (fund managers increasing the duration of bond portfolios, which is both typical and generally positive for bond markets in such a way that indirectly benefits MBS) and it has made for a green morning domestically.
The Incomes and Outlays report at 8:30am did little to change that, despite spending coming in a bit better than forecast. Here's the run-down:
Incomes and Outlays
- Spending +0.4 vs +0.2 forecast
- Income +0.0 vs +0.2 forecast
- PCE Price Index +0.1 vs +0.1 forecast
- Thoughts on Market Movement: There was perhaps a detectable amount of weakness following the data, but in the context of this morning, it did more to help the gains level-off than to create any overt movement.
- Full Release
The 1-2 punch from Chicago PMI and Consumer Sentiment coming up at 9:45am and 9:55am is more relevant by comparison. Fannie 4.0s are only a tick off their highs of the morning, currently at 104-25 (+0-06) while 10yr yields are down 3.6bps at 2.6585.