Bonds Bolstered by Big Swings in Inflation Data and Expectations
US bonds found several sources of inspiration overnight in the form of European inflation data. The biggest move followed a sharp decline in German inflation, but sellers struck back after Spain posted the highest numbers since 1985. Buyers said "Spain? Really?" as they bought more bonds following a second inflation release from Germany--also cooler than expected. EU bonds rallied hard into the close, dragging US bonds with them. The latter led at times due to month-end tradeflows and reactions to Fed Chair Powell as he spoke at the Sintra conference.
GDP Q1 Final: -1.6 vs -1.5 f'cast, -1.5 prev
stronger overnight on German inflation data. No reaction to US GDP data, but generally pushing back on overnight gains. 10yr down less that 1bp and MBS down 2 ticks (0.06).
Some 2-way volatility surrounding central banker comments at Sintra. 10yr down 2.8bps at 3.149 and MBS up 3 ticks (.09).
Stronger gains over the past 2 hours, now leveling off with 10yr down just under 7bps and MBS UP 6 TICKS (.19)
Mostly sideways since EU close, but MBS have tightened during that time with 4.5 coupons currently up 3/8ths at 100-01 (100.03). 10yr yields are at lows of the day down 8bps at 3.097.