US rate traders are pretty sure they have the Fed figured out after two separate Fed speakers used the word "skip" in speeches last week. There's a low chance of a rate hike next week, and a high chance that rates remain high through 2023. Today's BOC (Bank of Canada) announcement caused a bit of a rethink as to just how sure we can be about a "skip" next week and it added fuel to the fire of "higher for longer" when it comes to the forward outlook. Yields shot higher right after the announcement and never saw much of a recovery.
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- Trade gap -74.6b vs -75.2b f'cast
Initially slightly stronger overnight, but weaker with Europe. 10yr up 2.7bps at 3.704. MBS down 3 ticks.
additional weakness after BOC announcement. MBS down 6 ticks (.19) and 10yr up 5bps at 3.728
More weakness on Treasury's announcement of a lower-than-expected cash balance. 10yr up 11.8bps at 3.795. MBS down roughly 3/8ths of a point.
MBS and Treasuries hit weakest levels just after 1:15pm and have recovered a bit, MBS down roughly 10 ticks (.31) and 10yr up 10.3bps at 3.78.
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