Gradual Weakness All Day And a Quieter Calendar Ahead
Thu, May 16 2024, 5:00 PM
MBS Recap
Gradual Weakness All Day And a Quieter Calendar Ahead
MBS Recap Matthew Graham | 4:58 PM
Gradual Weakness All Day And a Quieter Calendar Ahead
Today brought the last of the scheduled economic data until the end of next week. Even then, the data won't be too relevant for at least 2 weeks when the next PCE price index comes out. Ironically, we've always considered Import Price data to be in the "not too relevant" category, but it appears to have challenged that notion today, thanks in large part to the massive gap versus expectations (0.9 vs 0.3). With that, a number usually disregarded as noise was suddenly worth a small bump in forecast for PCE. Initial weakness was modest and it leveled off quickly, but the rest of the day saw a slow, directional leak that left MBS down a quarter point.
modest losses after data. 10yr still down 0.2 bps on the day at 4.339 and MBS down 2 ticks (.06).
11:01 AM
MBS right in line with previous update (down 2 ticks or 0.06) but 10yr now up 1.8bps at 4.358.
02:33 PM
Additional weakness now with MBS down roughly a quarter point on the day and 10yr up 3.6bps at 4.376
04:41 PM
Still near the weakest levels with MBS and Treasuries unchanged versus the previous update.
Lock / Float Considerations
Thursday's bond market offered the opposite cue from Wednesday, which builds a case for consolidation as opposed to latent buying demand. Neither case was/is particularly strong, so take it all with a grain of salt. The base case is for an absence of any big, directional impulse from data or Fed-speak until the first week of June. Risk-averse clients would be feeling even more lock-biased today. Risk tolerant clients would increasingly consider the resistance at 4.34% in 10yr yields combined with a lack of market movers on the near-term calendar.