A Really Bad Day For The Bond Market
To reiterate the point made in today’s morning commentary, there was a mismatch between the size of the beat in the core inflation data (0.4 vs 0.3) and the size of the move in the bond market. This wasn’t a glaringly huge problem considering the February’s CPI beat resulted in about 15bps of weakness in the 10yr while today was “only” 18bps, but it just emphasizes the extent to which the market has increased its focus on this particular report. The afternoon’s 10yr Treasury auction added meaningfully to the weakness, and the Fed Minutes passed without a trace. Geopolitical headlines (vague warning regarding potential for Iran attacking Israel) helped modestly, and were the only other source of volatility after the auction.
Econ Data / Events
Core mm CPI
0.4 vs 0.3 f’cast, 0.4 prev
Core yy CPI
3.8 vs 3.7 f’cast, 3.8 prev
Market Movement Recap
08:29 AM A hair stronger ahead of CPI with MBS up 3 ticks (.09) and 10yr yields down 2bps at 4.344
08:42 AM Sharply weaker after CPI. MBS down 5/8ths of a point. 10yr up 13bps at 4.498.
10:42 AM Flat at weakest levels over the past 2 hours. MBS down nearly 3/4ths and 10yr up 12.7bps at 4.492.
12:36 PM drifting to weakest levels with MBS down 26 ticks (.81) overall and 10yr up 15bps at 4.515
01:46 PM Additional weakness after 10yr auction with 10s briefly up to 4.568. Still up 18.6bps at 4.55%. MBS down a full point.
04:09 PM coasting out near weakest levels. 5.5 coupons down just over a point. 10yr yield up 18.1bps at 4.546.