Lots of Volatility But Not Much to Do With The Fed

Today was indeed a Fed day and bonds definitely have a track record of volatility on Fed Days.  We could be forgiven, then, for assuming that today's bigger moves were a product of the Fed, but we can really only give them credit for some back and forth in the 2pm-3:59pm time frame.  Those happened to be the smallest directional moves of the day.  The AM hours saw a bigger rally for reasons discussed in this morning's commentary.  The PM hours saw a bigger rally due to month-end index extension buying. The Fed ended up doing very little for the longer end of the yield curve despite ruining the day for near-term Fed Funds Futures.

Econ Data / Events
    • Employment Cost Index
      • 0.9 vs 1.0 f'cast, 1.1 prev
    • Treasury Quarterly Refunding Announcement
      • auction size changes as expected
Market Movement Recap
10:49 AM

Initial gains after ECI data and TSY refunding announcement.  More gains into the NYSE open.  10yr down 8.2bps at 3.954.  MBS up a quarter point.

01:30 PM

Holding near best levels ahead of Fed.  10yr down 7.5bps at 3.961.  MBS up 7 ticks (.23).

02:08 PM

First move is weaker after Fed announcement specifies no cuts until inflation in check.  10yr still down 5bps on the day at 3.986, but up from lows of 3.944.  MBS up 2 ticks (.06), but down more than an eighth vs pre-Fed highs.

04:08 PM

Plenty of back and forth after the Fed.  Today's list of updates and alerts provides more granular detail.  Most recently, month-end buying is bringing bonds back to best levels of the day.  10yr down almost 11bps at 3.929.  MBS up a quarter point.

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