Bonds Erase Most of The Overnight Weakness

Thursday could be viewed two ways. On one hand, bonds lost ground early and were unable to recover it by the 3pm close. On the other hand, there was a decent rally on Wednesday that set a high bar for additional gains.  In other words, it’s a victory to merely hold close to yesterday’s closing levels. Data passed without a trace, either because it was stale, near consensus, or both. There was better buying in the afternoon–a fact that’s consistent with our observation that the EU session had an impact today.  The afternoon bond market recovery commenced when EU markets closed. Correlation, yes, but not necessarily causality. 

Econ Data / Events

Continued Claims (Jan)/10

1,849K vs — f’cast, 1884K prev

Core PCE Prices QoQQ3

2.90% vs 2.9% f’cast, 2.6% prev

Corporate profitsQ3

4.7% vs 4.4% f’cast, 0.2% prev

GDPQ3

4.4% vs 4.3% f’cast, 3.8% prev

GDP Final SalesQ3

4.5% vs 4.6% f’cast, 7.5% prev

Jobless Claims (Jan)/17

200K vs 212K f’cast, 198K prev

PCE Prices (Q/Q)Q3

2.8% vs 2.8% f’cast, 2.1% prev

Core PCE (m/m) (Nov)

0.2% vs 0.2% f’cast, 0.2% prev

Core PCE (y/y) (Nov)

2.8% vs 2.8% f’cast, 2.7% prev

PCE (y/y) (Nov)

2.8% vs 2.8% f’cast, 2.7% prev

PCE prices (m/m) (Nov)

0.2% vs 0.2% f’cast, 0.2% prev

Market Movement Recap

08:34 AM Modestly weaker overnight and no reaction to AM data so far. MBS down an eighth and 10yr up 1.7bps at 4.258

10:30 AM No major reaction to PCE data. MBS still down an eighth and 10yr up 2bps at 4.261

12:37 PM Bouncing back a bit. MBS down only 2 ticks (.06) and 10yr up only 1.3bps at 4.254

03:22 PM MBS down 3 ticks (.09) and 10yr up 0.8bps at 4.249