Helpful Data and Treasury Auction Set High Bar For CPI
Wed, Sep 10 2025, 4:28 PM
MBS Recap
Helpful Data and Treasury Auction Set High Bar For CPI
MBS Recap Matthew Graham | 4:27 PM
Helpful Data and Treasury Auction Set High Bar For CPI
Another fairly straightforward day for the bond market with friendly econ data and a strong 10yr Treasury auction both helping push yields lower. If it seems like the size of the miss in the PPI data justified a bigger move, consider the fact that it's an incredibly volatile data series. Additionally, last month's PPI created "base effect" issues (i.e. it was so high that today's -0.1% reading leaves the 2 month annualized level at 3.6%--still too high. Nonetheless, it was good enough news for bonds to push back against overnight weakness. The afternoon's 10yr auction helped bring yields to new lows for the day before ebbing slightly higher in the afternoon. Thursday AM's CPI release is this week's big to-do from a potential volatility standpoint.
Stronger after PPI data. MBS up roughly 1/8th and 10yr down 2.8bps at 4.055
11:59 AM
Best levels. MBS up 5 ticks (.16) and 10yr down 3.7bps at 4.046
01:05 PM
Strong 10yr auction prompts just a bit more buying in TSYs. 10yr now down 5.7bps at 4.026. MBS still up 5 ticks in 5.5 coupons, but almost 3/8ths in 5.0 coupons.
04:13 PM
MBS now up 3 ticks (.09) in 5.5 coupons and 6 ticks (.19) in 5.0 coupons. Both are down about an eighth from highs. 10yr down 3.8bps at 4.046
Lock / Float Considerations
Thursday morning's CPI data represents this week biggest risk in terms of potential rate volatility. If inflation falls short of forecasts by more than an incidental amount, it could easily facilitate more long-term lows for rates. Conversely, higher inflation would likely add to Tuesday's corrective impulse, but it would have to be MUCH higher to unwind more than a modest amount of the post-NFP gains.
