Even When It’s Good, It’s Bad

Bonds had a good overnight session with fairly steady gains in both Asia and Europe.  The morning was shaping up nicely and, up until 9:30am, it looked like bonds might squeak by with a bit of a victory on the day.  But as is so often the case recently, even the good days seem to find a way of turning bad.  Today was no exception.  A big reversal in UK trading got the party started for sellers, with the Consumer Sentiment data adding fuel to the fire.  Fed speakers frosted the cake with new versions of the same old ideas.  Bonds did a good job of leveling off in the afternoon, but not before 10yr yields were back above 4.0% and MBS down half a point. 

Econ Data / Events

Retail Sales

0.0 vs 0.2 f’cast, 0.4 prev

Excluding autos/gas/building materials

0.4 vs 0.3 f’cast, 0.2 prev
last month revised up from 0.0

Consumer Sentiment 

59.8 vs 59.0 f’cast, 58.6 prev

Current Conditions

65.3 vs 59.9 f’cast

1yr inflation expectations 

5.1 vs 4.7 prev

5yr inflation expectations

2.9 vs 2.7 prev

Market Movement Recap

09:34 AM moderately stronger overnight in a mostly linear pattern.  Limited reaction to econ data at 8:30am.  Now selling off a bit at the 930am NYSE Open.  10yr down 2bps at 3.928, up from lows of 3.85.  MBS up an eighth after being up more than 3/8ths.

10:39 AM Additional weakness after comments from Fed’s Daly and a few others.  10yr up 3bps to 3.981.  MBS down a quarter on the day and more than half a point from the highs. 

02:34 PM Very flat after the initial sell-off with no major change in MBS since before noon.  Currently down about half a point.  10yr up 6bps at 4.008.
Source: Mortgage News Daily