Powell Does Exactly What He Was Supposed To (And Bonds Didn't Like It)
From this AM: "some recent analysis has GREATLY overestimated the Fed's willingness to "twist."" In simpler terms, there was some buzz about Powell saying the Fed might sell short-term bonds and buy more long-term bonds. That buzz was silly this morning, and Powell confirmed the silliness by passing up 47 opportunities to say anything remotely indicative of twisty aspirations. In other words, sorry long-term bonds... the Fed isn't going to save you. The only surprise here today is the revelation of just how much of the bond market expected something else (as evidenced by the 1.47 to 1.54% sell-off following Powell). SIGNIFICANTLY more detail and explanation available in this commentary piece and in today's video.
Fed MBS Buying 10am, 1130am, 1pm
Jobless Claims 745k vs 750k f'cast
Factory Orders 2.6 vs 2.1 f'cast
Modestly stronger overnight with weaker vibes heading into domestic hours. MBS just turned negative and Treasuries are heading in that direction (10yr -0.5 bps at 1.479). Weakness is momentum driven and not a factor of the 8:30am data.
Better buying since 9am. It's not a runaway rally, but it reinforces yesterday's narrow range. 10yr down to 1.462 and 2.5 UMBS up just over an eighth on the day.
Markets tanked so hard after Powell's speech that we're just now getting around to updating it! In the meantimes, there were 4 alerts (1, 2, 3, 4), a huge explainer of a commentary piece, and an equally explanatory video. The bond rout has subsided for now with 10yr yields 5bps higher and MBS down about 30bps.