Weaker Data Offset by European Tapering Fears
Bonds improved after weaker economic data this morning. Traders keyed in on internal components of the Chicago PMI report and concluded some labor market weakness could spill over to the week's forthcoming employment reports. But hawkishness from the European Central Bank pushed bonds back into weaker territory. All of the above takes place inside the same sideways range that's been intact for more than 3 weeks now.
Fed MBS Buying 10am, 1130am, 1pm
FHFA Home Prices (June, y/y) 18.8 vs 18.0 prev
Case Shiller Home Prices 19.1 vs 17.1 prev
Chicago PMI 66.8 vs 68.0 f'cast, 73.4 prev
Consumer Confidence 113.8 vs 124.0 f'cast, 125.1 prev
Bonds were flat to stronger early in the overnight session, but began losing some ground in Europe in response to multiple reports showing higher inflation. US 10yr up only 1bp so far at 1.289. UMBS 2.0 down ticks (0.06) at 101-16 (101.5).
Volatility has gone both ways this morning, with moderate gains after Chicago PMI followed by slightly bigger losses following taper talk from an European Central Bank Official. 10yr now up 3bps at 1.31% and MBS down more than an eighth of a point.
Bonds made it through the 3pm CME close without any additional fanfare. 10yr yield up 2.4bps at 1.302% and MBS still down about an eighth of a point.