The music is currently playing for the role of Fed Chair next year.  When the music stops, Yellen may or may not still have a seat.  News came out this morning that Trump was meeting with former Fed governor Kevin Warsh about filling the role.  Warsh is also the son-in-law of one of Trump's long-time friends, and is considered to be a "hawk" on the spectrum of dovish vs hawkish policymakers. 

Hawks favor higher rates, relative to doves, and less accommodation.  As such, rates spiked this morning when the news hit, but never broke above yesterday's domestic-session highs.  Prior to that news, Core year-over-year PCE (one of the Fed's favorite inflation metrics) fell to 1.3% from 1.4% last month.  The Fed would prefer to see this at 2.0%, so the 1.3% result is rate-friendly.  Indeed, bonds improved slightly after the 8:30am data.  

More inflation-related data arrived at 10am in the Consumer Sentiment numbers.  This report includes 1 and 5-year inflation expectations, and the Fed has plainly said it follows these in addition to official measurements of inflation.  The 5-year metric fell to 2.5 from 2.6 last month.  While that's not the lowest it's ever been, 2.5 is in a very low range, long-term.  This may have helped bonds put an end to the selling inspired by the Trump/Warsh meeting (that news hit roughly 13 minutes before Consumer Sentiment).

From there through the 3pm close, bonds didn't move much--simply holding sideways at slightly weaker levels.  Volatility increased after the 3pm.  This is common on month/quarter-end trading days.  MBS are underperforming Treasuries heading into the after-hours trading session, adding slightly to negative reprice risk.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-02 : -0-05
10 YR
2.3318 : +0.0248
Pricing as of 9/29/17 3:49PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:46PM  :  ALERT ISSUED: Negative Reprice Risk Increasing Slightly, But No Major Shift in Bonds
9:58AM  :  ALERT ISSUED: Slight Increase in Negative Reprice Risk For Some Lenders
8:46AM  :  Slightly Stronger After Downtick in Core Inflation

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "bunch of smart comments on both sides of this point."
Sung Kim  :  "NAR is powerful"
Victor Burek  :  "and if standard goes up, even less will need it"
Timothy Baron  :  "Benefit of mtg deduction is so overblown. Most filers take the standard deduction anyway."
Sung Kim  :  "Studies have shown otherwise"
Dan Shapiro  :  "I agree... it would have a major affect"
Matthew Graham  :  "if I want to buy vs rent, or just buy in general, I wouldn't be likely to let a silly little thing like a marginal net benefit in taxes stop me from doing so. In that sense, I can't disagree too much. It will have an effect though, but just not for the average homebuyer."
Matt Hodges  :  "MBS Live is a no-brainer for me, MG"
John Tassios  :  "I 100% disagree."
John Tassios  :  "CNBC (Video) - 9:37 am Quicken Loans founder Dan Gilbert: As long as rates are reasonable, mortgage deduction going away doesn't matter"
Matthew Graham  :  "
New MBS Huddle Released
Simple Day For Bonds, plus "MBS Live Should be a No-Brainer""