Fed Threads Needle With Unfriendly Dots Balanced by Peaceful Powell

As expected, the market's initial focus fell squarely on the Fed's updated dot plot at 2pm ET today (Fed members' rate forecasts).  The fact that the policy statement was effectively a carbon copy of the last one made that an easy call.  The dots moved up perhaps slightly more aggressively than many expected. Bonds sold off a bit as a result.  But Powell struck an equanimous tone in the press conference, simultaneously explaining why rates were going a bit higher, but that the Fed was receptive to bringing them back down under the right conditions.  Bonds managed to bounce back to end in moderately stronger territory.  Best of all, the entire affair was contained in Tuesday's trading range, thus suggesting the market responded fairly logically to CPI and to the Fed's needle threading efforts, incidental or otherwise.

Econ Data / Events
    • Export Prices 
      • -0.3 vs -0.4 f'cast, -0.4 prev
    • Import Prices 
      • -0.6 vs -0.5 f'cast, -0.4 prev
Market Movement Recap
09:01 AM

No reaction to import/export data.  A hair weaker overnight in steady trading.  10yr up 1.7bps at 3.518.  MBS down an eighth.  Stocks roughly unchanged. 

12:45 PM

Small rally heading into 1030am and some push back since then, but still generally flat near unchanged levels ahead of the Fed.  MBS up 1 tick (.03) and 10yr up 0.7bps at 3.508.  

02:08 PM

First move is weaker after the Fed.  All on the dots.  There were no updates to the statement.  10yr up 5.3bps at 3.556.  MBS down nearly 3/8ths. 

03:14 PM

After initial weakness, bonds are bouncing back during Powell's press conference.  10yr down 1.5bps on the day at 3.483 and MBS up over an eighth.

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