Spoiler Alert: Yes, It Was War Headlines

Need a way to explain overnight weakness in the bond market? War headlines. Need to know why bonds rallied sharply just after 10am ET to hit the best levels in 2 weeks? Yep, more war headlines. Granted, the 8:30am econ data was not completely ignored. A slightly softer-than-expected PCE inflation number helped bonds get back to unchanged levels, but a substantial majority of the day’s volume followed the 10am news that essentially suggested the peace deal was approved, pending Trump’s final sign off. Later in the day, separate newswires suggested Iran hadn’t fully signed off, but no one seemed to care. Day over day gains were mild in the bigger picture, but resulted in the best trading levels in 2 weeks by the 3pm close. 

Econ Data / Events

Continued Claims (May)/16

1786.0K vs 1780K f’cast, 1782K prev

Core CapEx (Apr)

-1.1% vs 0.4% f’cast, 3.4% prev

Core PCE (m/m) (Apr)

0.2% vs 0.3% f’cast, 0.3% prev

Core PCE (y/y) (Apr)

3.3% vs 3.3% f’cast, 3.2% prev

Core PCE Prices QoQQ1

4.4% vs 4.3% f’cast, 2.7% prev

Corporate profitsQ1

-0.4% vs 5.7% f’cast, 5.7% prev

Durable goods (Apr)

7.9% vs 3.5% f’cast, 0.8% prev

GDPQ1

1.6% vs 2.0% f’cast, 0.5% prev

GDP Final SalesQ1

1.5% vs 1.6% f’cast, 0.3% prev

Jobless Claims (May)/23

215.0K vs 211K f’cast, 209K prev

PCE (y/y) (Apr)

3.8% vs 3.8% f’cast, 3.5% prev

PCE prices (m/m) (Apr)

0.4% vs 0.5% f’cast, 0.7% prev

Market Movement Recap

08:19 AM Weaker overnight on reports of ongoing hostilities in Iran. MBS down over an eighth of a point and 10yr up 2.3bps at 4.507

09:17 AM Back near unchanged after data-driven rally. MBS down 1 tick (.03) and 10yr down half a bp at 4.479

10:59 AM quick rally on “deal” reports and a bit of pull back on “yeah but” reports. MBS up 2 ticks (.06) and 10yr down 2.4bps at 4.46

01:02 PM Near best levels. MBS up 5 ticks (.16) and 10yr down 3.4bps at 4.45