Massive CPI Rally Cut in Half After Fed Announcement

As discussed in the AM commentary, bonds rallied sharply after this morning's CPI data (unrounded core monthly inflation at .163% versus a 0.3% forecast).  Those gains held up uneventfully until the Fed festivities began.  The most significant item on the Fed agenda was the dot plot at 2pm which showed the median outlook for 2024 rate cuts falling to "one" from "three."  Fed Chair Powell offered no dovish reassurances in the press conference, nor was he even very enthusiastic about this one month of data.  All of that was to be expected, but markets nonetheless acted like they expected at least a little token of rate rally affection.  By 4pm, about half of the CPI gains had been erased, but that's still a solid day in the bigger picture.

Econ Data / Events
    • month over month core CPI
      • 0.2 vs 0.3 f'cast, 0.3 prev
    • Annual core CPI
      • 3.4 vs 3.5 f'cast, 3.6 prev
Market Movement Recap
09:29 AM

sharply stronger after CPI data and holding gains so far.  10yr down 15bps at 4.271.  MBS up over 3/8ths in 6.0 coupons and nearly 5/8ths in 5.5 coupons

12:37 PM

Sideways to slightly stronger at best levels.  10yr down 14.6bps at 4.257.  MBS up half a point.

02:31 PM

Two-way trading after Fed's dot plot (announcement was unchanged, basically).  Initial weakness, but bouncing back as the press conference gets underway.  10yr down 13.3bps at 4.268.  MBS up 14 ticks (.44).

03:26 PM

MBS are now up "only" 10 ticks (.31) in 6.0 coupons and 14 ticks (.44) in 5.5. coupons. 10yr yields are down 8.9bps at 4.311

04:02 PM

Another few ticks of weakness.  MBS still up a quarter point, but about halfway back to pre-CPI levels.  10yr still down 7bps at 4.33.

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