Bonds Rally on Month-End Trading and Friendly Inflation Data

Bonds began the day in unchanged territory and made cautious gains after reasonably friendly inflation data.  PCE was a bigger factor than the Consumer Sentiment inflation expectations, but both contributed.  Given our position on the calendar, we should also consider the impact of month/quarter-end positioning. It would help account for some of this week’s resilience in US bond markets relative to the suggestion of equities markets or EU bonds.  

Econ Data / Events

Core PCE Inflation y/y

4.6 vs 4.7 f’cast, 4.7 prev

Chicago PMI

43.8 vs 43.4 f’cast, 43.6 prev

Consumer Sentiment

62.0 vs 63.2 f’cast, 63.4 prev

1yr inflation expectations

3.6 vs 3.8 prev

5yr inflation expectations

2.9 vs 2.8 prev

Market Movement Recap

09:31 AM Roughly unchanged overnight.  Moderately stronger after inflation data.  10yr down 3bps at 3.517.  MBS up 2 ticks (.06).

01:10 PM Slow, steady gains all day.  Some month-end bond buying is likely contributing.  MBS up more than an eighth.  10yr down 4bps at 3.507

03:20 PM Additional gains before and after the 3pm CME close.  10yr down 6bps at 3.486.  MBS up a quarter point.
Source: Mortgage News Daily