Decent Recovery But MBS Underperform

On Thursday, 10yr yields came close to spiking 20bps, trough to peak, in the wake of hotter CPI data and a lousy 30yr bond auction.  That’s a brisk day of selling and one that didn’t line up with this week’s theme (adjusting to softer Fed comments and pricing in some safe-haven flows surrounding the Israel/Gaza War). Today’s rally started early and stayed strong all night.  A pop in consumer inflation expectations brought the rally to an end, but bonds held on to gains without any drama in the PM hours.  MBS underperformed along with the short end of the yield curve. 

Econ Data / Events

Import Prices

0.1 vs 0.5 f’cast, 0.6 prev

Export Prices

0.7 vs 0.5 f’cast 1.1 prev

Consumer Sentiment

63.0 vs 67.2, 68.1 prev

1yr inflation expectations

3.8 vs 3.2 prev

5yr inflation expectations

3.0 vs 2.8 prev

Market Movement Recap

10:11 AM Steady gains overnight, flattening out into domestic hours.  10yr down 7.6bps at 4.621.  MBS up a quarter point

11:46 AM Slightly weaker into mid-day.  Consumer inflation expectations aren’t helping. MBS up only an eighth on the day.  10yr down 5.8bps at 4.639.

03:42 PM Very flat all day after earlier selling.  10yr down 7.2bps at 4.625,  MBS up just over an eighth of a point.