Powell Shows Up With Holiday Cheer For Bonds

While it’s not technically a holiday week, we are in the midst of the winter holiday season for the bond market.  And while it’s the holidays at the end of December that are typically associated with spreading cheer, Fed Chair Powell figured he’d get an early start.  Powell didn’t offer any new concepts for those who’d been paying attention to other Fed speakers, but markets nonetheless took heart in confirmation from the boss.  Month-end trading added to the gains at 4pm making for a full point round trip in MBS prices.

Econ Data / Events

ADP Employment 

127k vs 200k f’cast, 239k prev

Q3 GDP Prelim (1st Revision)

2.9 vs 2.7 f’cast, 2.6 prev
higher consumer spending
higher inflation adjustment
higher biz investment

Market Movement Recap

08:28 AM Sideways to slightly stronger in a narrow range overnight.  Modest positive reaction to ADP employment data.  10yr down 1.7bps at 3.735 and MBS up 2 ticks (.06).

08:37 AM losing ground after upward revision to GDP.  10yr now up 0.2 bps on the day at 3.752 and MBS down an eighth.

01:04 PM Additional weakness into mid-day.  No obvious motivations other than pre-Powell anxiety and curve flattening.  MBS down roughly a quarter and 10yr up 1.8bps at 3.768

01:43 PM Improving after Powell comments.  MBS down only an eighth.  10yr down 1.7bps at 3.733

03:18 PM Post Powell gains continued.  10yr down 5.2bps at 6.698 and MBS up 3/8ths of a point.
Source: Mortgage News Daily