Technicals Help Reconcile Selling Pressure

In the realm of market commentary, technicals are a vastly overused explanation for past movement, let alone for the prediction of future movement. In this week’s case, however, the consolidation pattern in bond yields offers one of the only ways to understand the otherwise inexplicable selling pressure. Long story short, the weakness was just the right size and pace to complete the pattern heading into events with more power to inspire definitive reactions and lasting momentum.

Econ Data / Events

Consumer Sentiment (Dec)

53.3 vs 52 f’cast, 51.0 prev

Sentiment: 1y Inflation (Dec)

4.1% vs — f’cast, 4.5% prev

Sentiment: 5y Inflation (Dec)

3.2% vs — f’cast, 3.4% prev

U Mich conditions (Dec)

50.7 vs 51.3 f’cast, 51.1 prev

Core PCE (m/m) (Sep)

0.2% vs 0.2% f’cast, 0.2% prev

Core PCE Inflation (y/y) (Sep)

2.8% vs 2.9% f’cast, 2.9% prev

Inflation-Adjusted Spending (Consumption) (Sep)

0.3% vs 0.3% f’cast, 0.6% prev

Personal Income (Sep)

0.4% vs 0.3% f’cast, 0.4% prev

Market Movement Recap

09:29 AM Modestly weaker overnight but recovering a bit.  MBS down 1 tick (.03) and 10yr up 1.2bps at 4.11

10:59 AM 10yr yields are up 3bps at 4.128. MBS are down only 3 ticks (.09) on the day.

12:20 PM MBS down an eighth and 10yr up 3.1bps at 4.129