Powell Sticks to Script. Bonds Like It
Fed Chair Powell's Jackson Hole speech has come and gone without causing any major drama. He held very close to his recent script which acknowledges the prospect of tapering in the near future while remaining dependent on just a bit more data and track record with the delta variant. Bonds had positioned defensively ahead of the speech and are simply pricing out some (not all!) of that defensiveness heading into a big week of econ data.
Fed MBS Buying 10am, 1130am, 1pm
Core PCE Inflation 3.6 v 3.6 f'cast/prev
refreshingly calm overnight with modest additional gains after the as-expected inflation data. 10yr down almost 3bps at 1.326% and 2.0 UMBS up an eighth. Powell on deck at Jackson Hole in a few hours.
Fairly sharp reversal in bonds as traders gear up for Powell's speech. Newswires from other Fed speakers are also in play. MBS down 2 ticks on the day (0.06) and nearly a quarter point from intraday highs. 10yr yields up .4bps at 1.358.
Bouncing back nicely as Powell speaks (generally dovish, aka "bond-friendly"). 10yr at lows of day, down 3.7bps at 1.317 and 2.0 UMBS up almost a quarter point at 101-11 (101.34).
Post-Powell rally continues. 2.0 UMBS now up 10 ticks (.31) on the day at 101-14 (101.44). 10yr down roughly 4bps at 1.312.