It was a tale of two market movers today as afternoon Fed comments completely reversed an earlier reaction to super strong economic data.  The Philly Fed survey blew expectations out of the water and handily crushed last month's numbers across the board.  Given that the market holds this report in higher-than-average regard, it was no surprise to see bonds losing ground right after it came out.

But bonds didn't lose as much ground as it seemed like they should, based on the size of the beat.  Part of the reason is that in the context of 2 months worth of Philly Fed data, this month's report looks a lot like the last massive beat in March.  Both followed exceptionally weak readings in the previous month (Feb and June respectively).  I'm not sure why economists didn't update their forecasts accordingly, but I'm betting they will be a bit more optimistic next time they see a big, isolated drop in the data.

All that having been said, bonds were indeed weaker after Philly Fed and they weren't exactly charging hard back to stronger territory.  That feat required incredibly dovish comments from Fed's Williams (see below) just after 2pm.  Bonds gained ground nicely after that with both MBS and 10yr yields making back into positive territory on the day.  Most lenders repriced for the better by the close of business.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
100-28 : +0-04
Treasuries
10 YR
2.0260 : -0.0350
Pricing as of 7/18/19 6:12PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:36PM  :  Fed's Williams Comments Kick Bonds Into Positive Territory
8:59AM  :  Logically Weaker After Massive Philly Fed Beat

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "remember that Fed Funds Futures are not intended to be extrapolated for probabilities. They're imperfect in that regard. Reason being: betting on what's certainly going to happen isn't as profitable as betting on what might happen and ultimately being right/lucky. Also, Fed Funds Futures can be used to hedge exposure elsewhere, in that case they have nothing at all to do with probabilities as they are merely offsetting another position held by the investor(s) in question."
Matthew Graham  :  "RTRS - FEDERAL FUNDS FUTURES IMPLY TRADERS NOW NEARLY 71% CHANCE FED CUTTING RATES BY 50 BPS AT JULY 30-31 MEETING, UP FROM 34% LATE WEDNESDAY - CME GROUP FEDWATCH"
Matthew Graham  :  "RTRS - FED'S CLARIDA SAYS DATA HAS BEEN MIXED BUT GLOBAL DATA IS DISAPPOINTING"
Matthew Graham  :  "RTRS - FED'S CLARIDA SAYS FED WILL ACT AS APPROPRIATE TO KEEP ECONOMY GROWING"
Matthew Graham  :  "RTRS - FED'S CLARIDA SAYS U.S. ECONOMY IN A GOOD PLACE BUT UNCERTAINTIES HAVE INCREASED -FOX BUSINESS NETWORK"
Bryce Schetselaar  :  "Nothing new. Seems like it's been that way for 10 years"
Michael Khoury  :  "So if anyone from the Fed sneezes, the market shifts?"
Brent Borcherding  :  "So, lowering rates is no longer simply a measure to reverse a slowing economy, but it is also to help juice a positive one. I think we all knew that but is Williams the first to flat out say it?"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS IF INFLATION GETS STUCK BELOW THE GOAL, PEOPLE'S EXPECTATIONS MAY PUSH INFLATION LOWER, REDUCING FED'S ABILITY TO BE EFFECTIVE"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS POLICYMAKERS MUST MOVE MORE QUICKLY TO VACCINATE THE ECONOMY AND ADD MONETARY STIMULUS WHEN RATES ARE CLOSE TO ZERO"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS RESEARCH SHOWS THAT WHEN NEUTRAL RATES ARE LOW YOU SHOULD NOT 'KEEP YOUR POWDER DRY'"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS IT IS BETTER TO TAKE PREVENTATIVE MEASURES ON RATES THAN TO WAIT FOR DISASTER TO UNFOLD"
Matthew Graham  :  "No impact really. There was some chatter about speeds of one effecting speeds of the other and thus negatively impacting UMBS prices, but it never panned out."
Tom Douglas  :  "Quick question on the UMBs - has this had any real effect yields directly? From everything I've read it seems like it is more for the second level of securitzation, so may take a little longer to trickle down or have we already seen the impact?"

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Jul 18
8:30 Philly Fed Business Index * Jul 21.8 5.0 0.3
8:30 Jobless Claims (k) w/e 216 216 209
Friday, Jul 19
10:00 5yr Inflation Outlook (%)* Jul 2.3
10:00 1yr Inflation Outlook (%)* Jul 2.7
10:00 Consumer Sentiment Jul 98.5 98.2