Solid Response to Data and Dovishness

The morning commentary focused more on the relatively dovish tone struck by Powell in today’s congressional testimony. To be clear, we wouldn’t say it was dovish in an outright sense, but when compared to last week’s press conference, it left more hope for fans of low rates. A separate development at the same time which deserves more attention is today’s labor differential in the Consumer Confidence Index. It suggests the worst labor market conditions since the economy exited covid lockdowns in 2020. Considering the Fed keeps saying a strong labor market is the key reason they can wait to cut rates, that’s timely data, and it will surely have traders on the edge of their seats for incoming employment-related releases. Bonds rallied early and held gains steadily into the close–nothing extreme, but another incremental victory.

Econ Data / Events

Case Shiller Home Prices y/y

3.4 vs 4.0 f’cast, 4.1 prev

FHFA Home Prices y/y

3.0 vs 3.9 prev

Market Movement Recap

10:45 AM Sideways to slightly weaker overnight, but gaining some ground during Powell testimony.  MBS up 5 ticks (.16) and 10yr down 3.7bps at 4.308

02:12 PM Holding post-Powell gains in a relatively narrow range.  MBS up 9 ticks (.28) and 10yr down 5.3bps at 4.292