Month-End Selling Keeps Rates Range-Bound

You’ve perhaps heard of month-end bond buying?  How about month-end selling?  We had some of the former earlier in the session with a reversal toward weaker levels at the 3pm CME close.  PCE inflation data wasn’t traded this morning.  Early cues came from overseas.  Late cues look more position-driven.  Even before that weakness, bonds rejected another opportunity to move below 3.72%, which increasingly looks like the bottom of the range unless next week’s data is convincingly downbeat.

Econ Data / Events

Core PCE y/y

4.9 vs 4.7 f’cast, 4.7 prev

Core PCE m/m

0.6 vs 0.5 f’cast

Headline PCE m/m

0.3 vs -0.1 f’cast

Chicago PMI

45.7 vs 51.8 f’cast, 52.2 prev

Consumer Sentiment (final)

58.6 vs 59.5 f’cast

Market Movement Recap

08:33 AM British Gilts rallied 20bps overnight, making the 6-8bp gain in US 10yr yields possible.  10s are now down 5.5bps now and MBS are up a quarter point.

11:06 AM 2-way volatility after AM data and now some organic weakness eroding the gains.  10yr down 3.7bps at 3.742.  MBS up 7 ticks (.22). 

01:43 PM More weakness now after UK bonds close for the day, but perhaps not because of it.  Month-end tradeflows look to be hitting as well.  10yr up to 3.766.  MBS down more than a quarter from the highs, but roughly unchanged on the day.

02:52 PM New Highs for 10yr yields ahead of month/quarter-end closing bell at 3pm.  Now roughly unchanged at 3.778.  MBS down 5 ticks (.16) on the day and 3/8ths of a point from the mid-day price plateau.
Source: Mortgage News Daily