• 2 things: tomorrow's FOMC Minutes and Today's Dell corporate bond
  • Both put pressure on bond markets
  • majority of weakness was in afternoon and focused on shorter-term debt
  • That's how we know it was more about Fed fear

Bond markets were doing a fair enough job of fighting off the implications of this morning's "as-expected" Consumer Price Index data, which continued to operate in the danger zone as far as Fed rate hike implications are concerned (Core CPI of 2.1% year-over-year).  Naturally, it didn't do too much damage considering it came in in-line with expectations. 

More damaging was the slow-motion panic that set in over tomorrow's FOMC Minutes.  The fact that we're only getting the Minutes from the late April Fed Meeting keeps the volatility in check, but investors were nonetheless concerned that the more detailed account of that meeting might show a Fed that was closer to hiking rates than the official announcement managed to convey.  The fact that short term yields lost the most ground today supports that conclusion.  

The big corporate bond deal from Dell also added pressure, but it was in the form of late day selling needs hitting an illiquid and already anxious market.  That made for quick losses heading into the close.  It likely wouldn't have been as bad as it was if the Fed wasn't coming up tomorrow and if market participants weren't digesting Fed speeches that seemed to support the rate hike ideology.  

Even then, the losses weren't too earth-shattering in terms of 10yr yields, which only rose 1.5bps to 1.772.  MBS lost a little more ground, given that they're slightly shorter duration bonds by nature (and short duration got hit the hardest).  For reference, 2yr yields rose 4.5bps.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
102-12 : -0-06
Treasuries
10 YR
1.7720 : +0.0190
Pricing as of 5/17/16 5:34PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:40PM  :  ALERT ISSUED: Negative Reprice Risk Increasing
1:53PM  :  ALERT ISSUED: On The Edge of Negative Reprice Risk Territory for Some Lenders
8:44AM  :  Bond Markets Briefly Weaker After Decent CPI Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "so that's 5-7 hikes by the end of 2017? I'm gonna go out on a limb here and say this economy isn't going to support that. 7 is dreaming. 5 is incredibly optimistic."
B C  :  "why not just do all 7 this year"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS GRADUAL MEANS 2-3 RATE HIKES THIS YEAR AND 3-4 HIKES NEXT YEAR"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS 2-3 RATE HIKES REASONABLE THIS YEAR"
Matthew Graham  :  "RTRS - FED'S LOCKHART SAYS ASSUMES 2-3 RATE HIKES POSSIBLE THIS YEAR"
Matthew Graham  :  "RTRS - FED'S LOCKHART SAYS BOTH WAGES AND PRICES ARE MOVING TOWARD FED'S OBJECTIVES"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS WE ARE IN A POSITION TO ENGAGE IN DISCUSSION OF NORMALIZING POLICY"
Matthew Graham  :  "RTRS - FED'S WILLIAMS SAYS JUNE WILL BE A LIVE MEETING"
Matthew Graham  :  "RTRS - FED'S LOCKHART SAYS MARKETS MORE PESSIMISTIC THAN HE IS ABOUT JUNE RATE HIKE POSSIBILITY"
Matthew Graham  :  "RTRS - FED'S LOCKHART SAYS FED COULD TAKE ACTION IN JUNE; ALL MEETINGS LIVE"
Hugh W. Page  :  "And it never fails. The agents after you notify them of the low appraisal almost always announce that your appraiser is incompetent."