Some Headwinds Ahead of Powell’s Jackson Hole Speech

Thursday brought the week’s only relevant econ data with 3 occasional market movers on tap.  Their results were mixed, but the important development was that the inflation components of the Philly Fed and S&P PMI data agreed that price pressures are alive and well. This made for a weaker start during the AM hours and that weakness was exacerbated by comments from Fed’s Hammack (who said current data doesn’t justify a September rate cut). A super strong 30yr TIPS auction at 1pm helped push back just a bit (which is quite remarkable as this essentially never has an impact). In the bigger picture, bonds could still be classified as drifting sideways to slightly weaker in a narrow range. Friday morning’s speech from Fed Chair Powell isn’t guaranteed to cause volatility, but it’s the week’s only true top-tier event in terms of volatility potential.

Econ Data / Events

Continued Claims (Aug)/09

1,972K vs 1960K f’cast, 1953K prev

Jobless Claims (Aug)/16

235K vs 225K f’cast, 224K prev

Philly Fed Business Index (Aug)

-0.3 vs 7 f’cast, 15.9 prev

Philly Fed Prices Paid (Aug)

66.80 vs — f’cast, 58.80 prev

S&P Manufacturing PMI

53.3 vs 49.5 f’cast, 49.8 prev

S&P Services PMI

55.4 vs 54.2 f’cast, 55.7 prev

Market Movement Recap

08:37 AM MBS are now down only 1 tick (.03) and 10yr yields are close to unchanged at 4.296 after being over 4.315 just before the data.

09:03 AM 10yr yields are back up to 4.312 (up 1.8bps on the day) and MBS are down 3 ticks (.09) on the day.

09:52 AM Weakest levels after PMI data.  MBS down an eighth and 10yr up 3.3bps at 4.328

11:22 AM MBS down 5 ticks (.16) on the day 10yr yields up 4.5bps on the day at 4.35. Fed’s Hammack comments are the driver of the most recent weakness

01:11 PM Some resilience after strong 30yr TIPS auction (never have we ever seen a 30yr TIPS auction move the market).  10yr up 3.4bps at 4.329 and MBS down 3 ticks (.09).