Old people who've been endlessly frustrated by the fact that no one seemed to be concerned about inflation for the past 6 or 7 years are finally having their day in the sun.  Inflation has actually been back in vogue (or en vogue, if you're pretentious) since at least May of last year.  That's when core annual CPI mysteriously began falling from its perch above 2%.  It would then spend several months languishing around 1.5% before revisions. 

Even after revisions, Core CPI was stuck at roughly 1.7% until the November 15th report.  Month-over-month Core CPI only made it up to 0.3% for the first time in a long time last month.  Today's report was important because it confirmed last month's move up to 0.3% and it once again pushed the annual number up to 1.8%.  All of the above builds the sense that inflation is rising up from last Summer's stagnant lows, and bonds are not happy about that at all.

We can assume some traders wanted to sell more bonds before today and were simply waiting to make sure CPI wouldn't throw a wrench in those works.  We can also assume a lot of traders were ready to go either way and simply followed the results.  After all, much of the broader move toward higher rates has been a gradual repricing of longer-term inflation expectations.  This is part of the reason the current move toward higher rates hasn't been remotely as abrupt as the 2013 taper tantrum or the post-election spike in 2016.  Those were individual events.  This is a process.

10yr yields hit new 4yr highs of 2.9204% and Fannie 3.5 MBS tanked by more than half a point.  Rate sheets are ugly and the sky is falling as far as some market participants are concerned.  Others think that every step higher in rate brings us closer to the first major correction for this early 2018 move.  Indeed that's true, but opinions vary as to how far that move will need to go before we see a bounce.

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
99-14 : -0-18
10 YR
2.9131 : +0.0731
Pricing as of 2/14/18 6:26PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:18PM  :  ALERT ISSUED: If You Haven't Seen a Reprice Yet, You Probably Will
1:18PM  :  ALERT ISSUED: Negative Reprices Becoming More Likely
11:49AM  :  ALERT ISSUED: Yields at New Highs; Negative Reprice Risk Considerations
8:34AM  :  ALERT ISSUED: Bonds Quickly Weaker After Stronger CPI Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Hugh W. Page  :  "Set that 30 yr Mortgage Chart MG posted to start on Sep 1 1981 for some perspective and see what the Freddie Mac Rate was back then. Crazy times."
Manny Gomes  :  "move up home buyers who have a sub 4 rate may question a move. I will be interesting to see consumer behavior when they are faced with larger payment shock due to higher rates"
Sung Kim  :  "so are you saying my refi flyers wont work?"
Micheal Humphrey  :  "Valentines Day Massacre - tomorrow's another day"
Matthew Graham  :  "If only we could have known that CPI could be a flashpoint"
Ryan Ford  :  "facemelter damn..."
Sung Kim  :  "pretty obvious where we are headed"
B C  :  "MG can you post me a 30yr mortgage rate chart?"
Victor Mendoza  :  "I've given up floating for Lent."
Joshua Cederlof  :  "Let it Bleed by the Stones just came up in rotation. Coincidence...?"
Sung Kim  :  "move up buyers have nothing to move up to - it's a negative feedback loop"
Sung Kim  :  "if only long-term locks existed"