Limited Support From Weaker Chicago PMI Data; More Support From Yellen
MBS and Treasuries continued to struggle heading into the 9:45am Chicago PMI data. Even after it printed weaker than expected, bonds didn't get much, if any traction. Stocks didn't come off their highs by more than 2 S&P points either. The only hope was that markets would be waiting to hear from Yellen a few minutes later.
Indeed they were.
In a nutshell, Yellen's bond-market-positive comments include:
RTRS - FED'S YELLEN: EXTRAORDINARY COMMITMENT TO STIMULUS WILL BE NEEDED FOR SOME TIME, A VIEW WIDELY SHARED BY FELLOW POLICYMAKERS
RTRS- YELLEN: ECONOMY STILL 'CONSIDERABLY SHORT' OF FED'S GOALS; WILL TAKE TIME TO REACH
RTRS- YELLEN POINTS TO PART-TIME WORKERS AS EVIDENCE LABOR CONDITIONS WORSE THAN SUGGESTED IN UNEMPLOYMENT RATE
RTRS- YELLEN: RECOVERY STILL FEELS LIKE A RECESSION TO MANY AMERICANS
While a few of these points consistently make the rounds among the justified economic bears, it's good to see them acknowledged by the new Fed Chair. The ensuing positivity for bond markets hasn't been triumphant, but it brought 10yr yields well off their highs and MBS well off their lows. Both have bounced already and given up about half the post-Yellen gains, and we now wait to see which spike is the head-fake.