Bonds rallied today, eventually.  Most of the session was fairly flat with the afternoon bringing most of the rally thanks to another sell-off in stocks.  This time, the stock losses were more measured, but only relative to days like yesterday.  On a normal week, today's stock losses would have been huge.  The fact that bonds only gained as much as the did is telling, and probably grounds for concern about the sustainability of the move.

As much as it pains me to say it, bonds have their widest eye on stocks at the moment.  The uncertainty of the day's stock momentum prevented any bond trading aspirations during the morning hours, despite the fact that weaker core inflation justified a rally.  Think about it this way: bonds already got to rally quite a bit yesterday, well before the inflation data came out.  There's really no telling where yields would have ended up today if not for the 2-day move in stocks. 

Bottom line: we'll need to see what the 3-day move in stocks looks like tomorrow.  If we have anything going for us, it's the fact that bonds seem to have obviously encountered resistance at the 3.13% pivot point in 10yr yields, and a majority of traders are probably gearing up for a bounce if stocks don't sell-off again tomorrow.  That creates (maybe) lopsided short positions in the short term.  If buyers make a strong enough showing to cross the right levels, there's a chance we'll see a short squeeze.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.0
100-09 : +0-06
10 YR
3.1460 : -0.0790
Pricing as of 10/11/18 6:15PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:46PM  :  Here We Go Again? Stocks Leading Yields Lower
1:08PM  :  Solid Demand at 30yr Auction; Bonds Rallying Modestly
8:39AM  :  CPI Slightly Weaker Than Expected; Modest Rally in Bonds

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "110%"
Edgar  :  "Correct me if I am wrong but the Fed is doing exactly what the market has been expecting them do. I don't remember reading any headlines that say: "Surprise Fed rate hike" or "The Fed raises more than expected". Other than that dumb comment about how the economy can stay strong forever Powell has done a great job."
Matthew Graham  :  "The notion that Powell is doing anything different than Yellen would be doing is also preposterous. Cramer's article yesterday was laughable."
Matthew Graham  :  "and while I intend to address it in greater detail in one of the several rant videos I plan on doing in the next 48 hours, I will say that the notion that the Fed has anything to do with the stock sell-off is utter madness. The Fed will be the FIRST to say rate hikes need to slow down as soon as there's evidence they aren't actually behind the curve."

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Oct 11
8:30 Core CPI Year/Year (%)* Sep +2.2 2.3 2.2
8:30 CPI mm, sa (%)* Sep +0.1 0.2 0.2
8:30 Jobless Claims (k) w/e 214 206 207
13:00 30-Yr Bond Auction (bl)* 15