Calm Today. Bigger Volatility a Risk For Tomorrow
Treasuries began the domestic session in modestly weaker territory after an uneventful overnight session. There was 2-way trading after the PPI data, but it soon revealed itself to be noise in a broader mover whereby yields were backing away from the technical floor at 1.42. Stocks lost ground, which also makes sense in a narrative where traders are circling the wagons ahead of tomorrow afternoon's Fed announcement. MBS outperformed moderately and were only down 2 ticks (0.06) from yesterday's closing levels at 4pm ET.
Fed MBS Buying 10am, 11:30am, 1pm
Core Producer Price Index 7.7 vs 7.2 f'cast, 6.8 prev
Moderately weaker overnight with 10s topping out at 1.443. Modest recovery after PPI data with 10s up only 1.4bps on the day to 1.427. MBS down only 3 ticks (0.09) versus a quarter point of weakness at the open.
Post PPI gains reverse course. 10yr now up 3.7bps at 1.45 and MBS down more than an eighth of a point.
Early weakness was mostly erased as stocks swooned heading into the 11am hour. 10yr yields up only 2.9bps and MBS back near the highs, down only 3 ticks (0.09) on the day at 102-05 (102.16).
Very flat all afternoon and little-changed from the previous update.