Posted To: MBS Commentary
We came into today expecting some asymmetric risk in favor of the bond market due to the recent tendency to take inflation numbers in stride. In simpler terms, that meant a report that was near forecasts (or just slightly higher) wouldn't necessarily need to result in bond market weakness, but all bets were off for a bigger beat. We got the bigger beat (4.5 vs 4.0 core y/y) and bonds can't help but acknowledge it. The broader market's reaction function is crystal clear. The notion of economic data as a key market mover is still valid, but data's impact is currently being heavily filtered through the Fed's policy lens. In other words, "what will the Fed do now in light of this data?" When reports suggest earlier tapering and rate hikes, stocks and bonds do this…(read more)
Source: Mortgage News Daily
