Why Are We Here And Where Are We Going?
The bond market has entered a lull heading into Memorial Day weekend. There isn't much by way of hotly anticipated reports or events apart from the debt ceiling drama, and we'd continue to argue against that being a market mover that sets any sort of long term tone. In general, bonds are leaning on last week's econ data and Fed speeches to support the conclusion that the Fed may not be all the way done hiking rates. Even if there is not another rate hike, the bond market increasingly believes the Fed will hold at ceiling levels for longer and longer. Unfortunately, there's room to run to even higher rates if the data supports it. Conversely, the recent weakness means there's at least as much room to recover in the event of rate-friendly data. Either way, we'll be waiting until after memorial day for bigger ticket data to have its say.
Initially flat overnight, then weaker on Kashkari comments (may need to go north of 6%, Fed Funds Rate). 10yr up 1.2 bps at 3.694. MBS down 3 ticks (.09).
A bit more weakness throughout the morning. MBS down 6 ticks (.19) and 10yr up 4.1bps at 3.723
Sideways in a narrow range since the last update. Same levels (MBS down 6 ticks and 10yr at 3.723)