Bonds Lose Almost All The Gains After Inflation Warnings in The Data
Wed, Apr 23 2025, 4:42 PM
MBS Recap
Bonds Lose Almost All The Gains After Inflation Warnings in The Data
MBS Recap Matthew Graham | 4:41 PM
Bonds Lose Almost All The Gains After Inflation Warnings in The Data
Bonds started out sharply stronger today after Trump walked back previous comments on Fed Chair Powell. Headlines regarding lower tariffs for China also helped, but they helped stocks more. The good times began unravelling with the 9:45am S&P PMI data. Both manufacturing and services PMIs showed sharp increases in prices. This is one of the first clear examples of tariffs impacting inflation data. Markets were quite willing to trade the data this time (unlike with the recent CPI/PPI releases--probably because those showed lower inflation in a world that feared higher inflation) with bonds ultimately almost fully erasing the AM gains.
Sharply stronger overnight on Trump's reversal on Powell/China. MBS up nearly half a point and 10yr down 9bps at 4.304
10:41 AM
Losing some ground as bonds react to inflation implications in PMI data. MBS still up 3/8ths, but down a quarter point from highs. 10yr down 5.8bps at 4.338 but up 7bps from lows.
03:39 PM
More selling, but finding some support. MBS still up an eighth on the day and 10yr down 1.7bps at 4.38
Lock / Float Considerations
Rates/bonds find themselves in the unfortunate and frustrating position of being more prone to react to fiscal headlines than to economic data. This means that things may look fairly calm at times when headlines are uneventful, but volatility can pop at a moment's notice if the headlines pick back up. Clarity on tariffs/trade and the status of Fed Chair Powell's tenure will be needed in order to move past this period of elevated directional risk for rates.
