Fully Free to Focus on CPI After Tuesday’s Uneventful Data and Events

Bonds shrugged off this morning’s PPI data, not that it’s typically much of a market mover anyway.  In this case, while the headline monthly reading of 0.4 vs 0.2 f’cast and -0.2 previously could have raised some concern, the core level hit expectations of 0.3.  That left the 10yr Treasury auction and Fed Minutes as the other two calendar items of note.  The auction proved to be a temporary, easily-cleared hurdle and the Fed Minutes did no harm (and possibly helped a bit).  With that, bonds stayed safely inside the prevailing range as they wait to digest Thursday’s CPI data.

Econ Data / Events

Producer Prices 

core m/m 0.3 vs 0.3 f’cast/prev
headline m/m 0.4 vs 0.2 f’cast, -0.2 prev

10yr Treasury auction

3.93% vs 3.916% 1pm when-issued level

10yr auction  Bid-to-cover

2.34 vs 2.42x recent average.

Market Movement Recap

08:50 AM Initially stronger overnight, then weaker after German Bund auction.  Slight recovery for 10 minutes at the 820am CME open, then back toward weakest levels after 8:30am PPI data.  Currently up just over 2bps in 10yr yields.  MBS 2 ticks (0.06) stronger. 

10:02 AM Back into positive territory with 10yr yields down 1bp at 3.935 and MBS up nearly a quarter point.

01:14 PM giving up gains after weaker 10yr auction.  MBS down 2 ticks but illiquid.  10yr still down 1.2bps on the day, but up more than 3bps from lows. 

02:29 PM delayed, positive reaction to Fed minutes resulting in day’s best levels with 10yr down just over 5bps at lows of 3.884 (bouncing a bit higher now) and MBS up more than a quarter point (also giving up some gains).
Source: Mortgage News Daily