Stronger Overnight, but Sideways After PPI; Waiting for Stocks' Next Move
Bond markets were unchanged for most of the overnight session, but began moving with equities around 5am. 10yr yields fell from the 2.65's to just under 2.61 between 4:40am and 8:20am--a fairly big move for any 4-5 hours, let alone those falling in the overnight session.
MBS opened at stronger levels as a result, but remained within yesterday's trading range.
The morning's first economic data--Producer Prices--came in stronger than expected.
- March PPI +0.5 vs +0.1 forecast, biggest rise since June 2013
- Core PPI +0.6 vs +0.2 forecast, -0.2 in Feb
- Year over year +1.4 vs +1.1 forecast
This flies in the face of the 'deflationary panic' that is credited with some of strong movement in bond markets over the past few days. As such, the morning rally paused when the data came out, and even took a few steps back.
There hasn't been a 180 degree turn though. Instead, both MBS and Treasuries have been sideways at slightly stronger levels, ostensibly waiting to see what happens with the cash open in stocks about 15 minutes from now.