There's remarkably little else to observe beyond this morning's initial commentary. Bonds did exactly what we would have expected based on the sharply higher inflation reading with 10yr yields popping about 10bps higher and MBS shedding 3/8ths of a point, if there's any new news, it's simply that bonds managed to avoid any major additional selling pressure after the initial push in the first 2 hours of trading. Yields are closing out the day right in line with the levels seen 10 minutes after CPI came out.
Obliterated after CPI. MBS down almost half a point and 10yr up 11bps at 4.639
01:05 PM
modest recovery heading into 10yr auction, but losing some ground afterward. 10yr up 11.1bps at 4.638. MBS down just over 3/8ths.
02:52 PM
Still relatively flat after initial selling. 10yr up 10.7bps at 4.635. MBS down just over 3/8ths
Lock / Float Considerations
Wednesday morning's CPI data (inflation MUCH higher than expected) means we should assume the path of least resistance for rates is "up" until proven otherwise. There will be an initial correction at some point that raises hope that selling has ended, and such corrections are rarely indicative of a lasting reversal of momentum.
