10yr Testing 2.57 Boundary on Post-Fed Momentum
The Fed KNOWS that the relatively disenfranchised masses won't soon be rolling in enough extra cash/wages to support any meaningful increase in inflation. And after yesterday, the whole world knows the Fed knows. The Fed had an opportunity to at least look up and mutter a noncommittal "hmmm..." in inflation's general direction yesterday, but instead they kept their nose down, working on the same old stuff.
In an FOMC afternoon that was otherwise devoid of implication, the absence of a gear-shifting on the inflation discussion could be taken as a dovish sign--a sign the Fed is serious about keeping policy rates low well after the end of asset purchases. The lowering of the long-term rate outlook combined with the huge drop in the GDP forecast rounded out that dovish sign and (probably, mostly) counteracted the slightly hawkish movement in the 2015/2016 rate projections (Yellen would later refer to that move as a demographic issue within the Fed).
All that to say that markets have reason to rally today, and that's just from a fundamental standpoint. The technicals were looking friendly heading into today as well (noted in the Day Ahead).
Conclusion: markets may be improving after Jobless Claims data, but quite clearly not BECAUSE of it. The bigger trades in the morning's rally have come in between 8:40am and 9:00am whereas a claims-inspired rally would have drawn them in from 8:30 to 8:40.
Whatever the case, we're rallying! It's not a barn-burner in MBS (Fannie 3.5's up 5 ticks to 102-13), but Treasuries are testing their 2.57 technical level. The lowest we've seen so far is 2.5645 and 10's are currently RIGHT at 2.57000000000 (a few extra zeros added for emphasis, but at least 2 of them are legit).