There are two kinds of rate/bond watchers today: those who tuned in late in the day to see bonds almost perfectly unchanged and those who were tuned in through the mild volatility this morning. The former group would simply shrug and go back to whatever it was they were doing while the latter might be frustrated to see bonds losing ground on a morning where inflation came in lower than expected. For the frustrated crowd, this was the plan for today--the asymmetric risk discussed yesterday. A decent result was never likely to help bonds. The subsequent weakness was driven by other factors, not CPI (risk-on trading and a series of tariff headlines from China). Even then, unchanged is unchanged.
MBS up about an eighth and 10yr down 2.4bps at 4.446
09:58 AM
Losing ground in the NYSE session. 10yr up 0.4bps at 4.474. MBS back to unchanged.
12:09 PM
New lows. MBS down 3 ticks (.09) and 10yr up 2.4bps at 4.492
04:49 PM
Decent late bounce. 10yr roughly unchanged at 4.47. MBS down 1 tick (.03)
Lock / Float Considerations
Bonds/rates find themselves in the unpleasant position of not knowing where their next big impetus for improvement will come from. While it's true that rates can fall despite an obvious catalyst, this is nonetheless not a float-friendly environment. The only foreseeable exceptions would be for seriously weak economic data and another big dip in stocks.
