Finally Time to Start Entertaining an Actual Shift?
Bonds have made several attempts to consolidate and bounce at various times during the rapid sell-off that began in early March. Each of those attempts has been met with frustration and additional weakness. While the present example may ultimately prove to be no different, it's at least shaping up with a few more things going for it. These include the lowest inflation expectations in nearly 2 months, a concerted bounce in Fed Funds Futures, and a sense of moderation in recent Fed comments. The big unknown is the extent to which heavy stock selling has contributed to a safe-haven bid for bonds. As such, we'd still like to see how well bonds can keep the good times rolling the next time stocks have a great day.
Fed MBS Buying 10am, 11:30am, 1pm
Producer Price Index ...0.5 vs 0.5 f'cast, 1.6 prev
Core PPI ...................0.4 vs 0.6 f'cast, 1.2 prev
Jobless Claims.......... 203k vs 195k f'cast, 202k prev
Stronger out of the gate in the overnight session with most of the gains arriving with European trading hours. 10s down 9bps at 2.835 and 4.0 UMBS up 10 ticks (.31) at 99-18 (99.56).
Vert slight ebb in the gain heading into the 10am hour, but buyers are sticking around. MBS up 7 ticks (.22) and 10yr yield down 8bps at 2.844.
Highs of the day for MBS, up 3/8ths at 99-20 (99.625). 10yr at lows of the day, down 10.5bps at 2.819. No new market movers, but a fair amount of correlation with losses in equities. Treasury technicals are increasingly promising as well.