Bonds ended the week/month at their strongest levels with 10yr yields breaking below the 4.0% floor to close at 3.95+. In addition to the low outright levels, the journey was accomplished with minimal volatility along the way. This is potentially surprising given this morning's much higher PPI numbers, but as discussed in the AM commentary, PPI is notoriously volatile and hasn't had a noticeable impact since 2024. Next week brings the typical early month, big ticket econ data (ISM, ADP, and the jobs report).
No reaction despite balmy PPI. MNS up 1 tick (.03) and 10yr down 2.2bps at 3.982
01:03 PM
MBS up 2 ticks (.06) and 10yhr down 3.5bps at 3.969
03:27 PM
MBS up 2 ticks (.06) and 10yr down 3.7 bps at 3.967
Lock / Float Considerations
For essentially the entire month of February, it was as if bonds could do no wrong. Much of that was data driven, but some of it wasn't. The only immediate volatility consideration is that some of the strength could be driven by month-end trading, in which case the coming week could see some excess selling pressure unrelated to the data. But the data should ultimately set the tone--especially after Friday's jobs report.
