What's Up With The Big Bond Rally Despite Higher Inflation?
Fri, Mar 28 2025, 5:14 PM
MBS Recap
What's Up With The Big Bond Rally Despite Higher Inflation?
MBS Recap Matthew Graham | 5:14 PM
What's Up With The Big Bond Rally Despite Higher Inflation?
It was one thing when bonds were only modestly stronger after this morning's inflation data. But 10yr yields went on to drop 12.7bps to the day at the lowest levels of the week (4.235%) and MBS rallied nearly 3/8ths of a point. The magnitude of the additional improvement demands additional explanation. On a speculative note, it's a strong possibility that we're seeing month/quarter-end positioning play a role. On a more obvious note, stocks tanked and there's a strong tendency for friendly spillover to bonds when stocks sell this much.
Stronger overnight and improving after PCE. MBS up 6 ticks (.19) and 10yr down nearly 6bps at 4.303.
01:30 PM
Rally continues. Stocks swooning. MBS up 10 ticks (.31) and 10yr down 11bps at 4.253
03:27 PM
Sideways and just off best levels. MBS up a quarter point and 10yr down 10.2bps at 4.259
Lock / Float Considerations
Due to potential distortions from month/quarter-end trading, the momentum that we're seeing at the end of March shouldn't be taken as a sign of things to come in early April. If the resilience is to continue, it would require support from weaker economic data.
