Why Aren't Bonds Responding to a Big Beat in Inflation Data?
Why Aren't Bonds Responding to a Big Beat in Inflation Data?
Bonds were fairly flat overnight and haven't moved much so far in the domestic session. More importantly, until 7am, bonds were slightly weaker even as oil prices have fallen and stocks have rallied. What gives?! If PPI had come in much higher than expected, it would be easier to explain. But despite the 0.1 vs 0.5 reading for core monthly numbers, the PPI components that track with the more important PCE inflation metrics were actually a bit higher. In addition, the ill effects of fuel prices have already wreaked havoc on March inflation data. If we assume (and we should) that the full effects of higher fuel prices were not yet reflected in March prices at the time of the PPI data collection, bonds have to continue treading cautiously over the inflation outlook in coming months. Away from the data and war headlines, there are other considerations ranging from new estimates of the cost to fund the war and new warnings about forced selling of leveraged bond holdings if rates start rising again.
No real reaction to PPI data despite being much lower than expected. MBS unchanged on the day and 10yr up less than half a bp at 4.293
Best levels of the day with MBS up an eighth and 10yr down 1.2bps at 4.277
Best levels. MBS up nearly a quarter point and 10yr down 3.4bps at 4.255
Selling Reverses After De-Escalation Headlines
| Time | Event | Period | Actual | Forecast | Prior |
|---|---|---|---|---|---|
| Tuesday, Apr 14 | |||||
| 6:00AM | Mar NFIB Business Optimism Index | Mar | 95.8 | 98.6 | 98.8 |
| 8:15AM | ADP Employment Change Weekly | 39K | 26K | ||
| 8:30AM | Mar PPI y/y | Mar | 4% | 4.6% | 3.4% |
| 8:30AM | Mar PPI m/m (%) | Mar | 0.5% | 1.1% | 0.7% |
| 8:30AM | Mar Core PPI y/y (%) | Mar | 3.8% | 4.1% | 3.9% |
| 8:30AM | Mar Core PPI m/m (%) | Mar | 0.1% | 0.5% | 0.5% |
| 11:30AM | 6-Week Bill Auction (%) | 3.630% | 3.615% | ||
| 12:15PM | Fed Goolsbee Speech | ||||
| 12:45PM | Fed Barr Speech | ||||
| 1:00PM | Fed Collins Speech | ||||
| Wednesday, Apr 15 | |||||
| 12:00AM | Roll Date - UMBS 15YR, Ginnie Mae 15YR | ||||
| 7:00AM | Apr/10 MBA Refi Index | Apr/10 | 919.9 | ||
| 7:00AM | Apr/10 MBA Purchase Index | Apr/10 | 161.1 | ||
| 7:00AM | Apr/10 Mortgage Market Index | Apr/10 | 276.0 | ||
| 8:30AM | Apr NY Fed Manufacturing | Apr | -0.5 | -0.20 | |
| 8:30AM | Mar Import prices mm (%) | Mar | 2% | 1.3% | |
| 8:30AM | Fed Barr Speech | ||||
| 10:00AM | Apr NAHB housing market indx | Apr | 37 | 38 | |
| 10:30AM | Apr/10 Crude Oil Inventory (ml) | Apr/10 | 3.081M | ||
| 12:00PM | NOPA Crush Report (%) | ||||
| 1:45PM | Fed Bowman Speech | ||||
| 2:00PM | Fed Beige Book | ||||