Making Sense of Today’s Seemingly Senseless Selling

Let’s refresh our memories regarding 2022’s bond trading: a sharp acceleration in inflation concerns led to a big shift from the Fed and heavy selling in the bond market and aggressive flattening of the yield curve.  Now we’re tasked with making sense of more heavy selling in the bond market following a big DROP in inflation.  The steepening of the yield curve is one way to begin that process.  Today (and this week in general) it was compounded by Treasury supply in the longer part of the curve and a bounce back from overbought technicals.

Econ Data / Events

Headline PPI

m/m -0.5 vs 0.2 f’cast, 1.0 prev
y/y   9.8 vs 10.4 f’cast

Core PPI

m/m 0.2 vs 0.4 f’cast, 0.4 prev
y/y 7.6 vs 7.6 f’cast, 8.4 prev

Jobless Claims 

262k vs 263k f’cast, 248k prev

Market Movement Recap

09:13 AM Sideways to slightly stronger in the overnight session with most of the gains coming between 7:30 and 8:10am ET.  Losing some ground after 8:30am data.  10yr down 2bps at 2.764 and MBS up a quarter point.

01:03 PM Steady selling after 10am and a bit more after the 30yr bond auction just now.  10yr up 6bps at 2.846.  MBS down a quarter point on the day and roughly half a point from the highs. 

02:41 PM Selling continues.  New lows for MBS, now down more than 3/8ths on the day and more than 5/8ths from rate sheet print times.  10yr yields are up more than 11bps at 2.897.

04:35 PM Flatter trading for Treasuries over the past 2 hours.  MBS have lost another tick or two.  
Source: Mortgage News Daily