Fed Threatens to Pull Car Over, But Keeps Driving

Four times a year, the Fed updates its SEP (Summary of Economic Projections) which detail the "most likely outcomes" for several metrics including the end-of-year Fed Funds Rate.  While Powell has been clear in repeating this is not a prediction, no one else is really sure what else it would be.  Today's dots (the "dot plot" used to convey the rate outlook) showed another 0.50% in rate hikes by the end of the year.  Bonds ended the day in slightly stronger territory because the change in the dots was widely expected and already traded into prevailing levels.

Econ Data / Events
    • Core Producer Prices, m/m
      • 0.2 vs 0.2 f'ast/prev
    • Core Producer Prices, y/y
      • 2.8 vs 2.9 f'cast, 3.2 prev
Market Movement Recap
08:34 AM

fairly flat overnight. modest gains since 7:30am ET.  10yr down 2.5bps at 3.802.  MBS up 1-2 ticks (0.03-0.06)

02:22 PM

Weaker after the Fed due to DOTS.  10yr roughly unchanged at 3.823.  MBS down 6 ticks (.19) but illiquid.

02:58 PM

Bouncing back a bit as Powell speaks.  5.0 coupons unchanged now.  10yr yield down 3.3bps at 3.794.

03:38 PM

Sliding back toward weakest levels now, albeit with some distortion due to illiquidity.  MBS down about a quarter point.  10yr yield down 1.4bps on the day at 3.813.  Shorter-term Treasuries trading 4-7bps higher on the day.

04:21 PM

Back into positive territory for MBS with 5.0 coupons up 2 ticks (.06).  10yr down 3bps at 3.796.

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