The highest core inflation in decades proved to be no big deal this morning. In fact, bonds rallied. Unfortunately, that set up for a technical selling opportunity as traders pared long positions heading into the weekend. The selling stalled right at the 1.53% technical level in 10yr yields. We'll hope that ceiling continues to hold and we'll send out another alert if it doesn't (provided MBS are following suit).
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Fed MBS Buying 10am, 1130am, 1pm
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Core PCE y/y 3.4 vs 3.4 f'cast, 3.1 prev
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Consumer Sentiment 85.5 vs 86.5 f'cast, 86.4 prev
1yr inflation expectations down 0.4% from May
5yr inflation expectations down 0.2% from May
Stocks and bonds both popped modestly stronger after as-expected PCE data. Most of the rally has been retraced in bonds, but 10s are still down 1.4bps at 1.485 and UMBS 2.0s are holding gains of 2 ticks (0.06).
The low yields seen after PCE made for a good selling opportunity in bonds heading into the weekend. 10s are up half a bp now at 1.505 and 2.0 UMBS are unchanged at 100-24 (100.75).
More serious selling heading into the weekend and the 11am hour, but 10yr yields bounced almost perfectly at the 1.53% level. MBS are outperforming nicely for now. If 1.53% breaks, we could see another flush of weakness. If it holds, the week is over.
MBS Market Alerts
