Here’s What Matters on Fed Day
Bonds sold off some more today because why not?! 10yr yields were more involved than 2s for a change, ultimately setting new long-term highs of 3.604. MBS outperformed thanks to their shorter implied duration vs 10s. Selling is selling at this point. We’ve seen plenty and it’s been unfortunately linear since August. How about Fed day? Today’s video breaks down what we know, what we don’t, and what parts of the Fed events are most likely to produce volatility.
Econ Data / Events
1.575m v 1.445m f’cast
1.517m vs 1.610 f’cast
Philly Fed Services Index
2.5 vs -3.7 prev
Market Movement Recap
08:35 AM sharply weaker overnight on a EU inflation data, Sweden’s surprisingly big rate hike, and big position-squaring in the pre-Fed flattening trade. 10yr yields up 7.4 bps to 3.569 and MBS down roughly 3/8ths.
09:51 AM Additional weakness heading into and out of the 9:30am NYSE open. 10yr up 9bps at 3.583 and 4.5 UMBS down almost 3/8ths at 97-06 (97.19). No illiquidity scapegoat at the moment… Stocks are also down sharply, suggesting a “Fed fear” trade.
10:56 AM 10yr at highs of the day, up more than 10bps trading just under 3.60%. MBS down 14 ticks (.44). No new news behind the weakness–just momentum.
11:42 AM Bit of a recovery now, especially in MBS, which are now back to their higher levels of the day (albeit still down 10 ticks or .31 in total). 10yr yields now up “only” 7.9bps at 3.573 after being over 3.60 at the highs.
01:10 PM Some additional strength after the decent 20yr bond auction. 10yr yields now up only 4.7bps at 3.542 and MBS down only a quarter point.
03:23 PM Giving up some of the mid day gains after 2pm, but no major shift in intraday terms for MBS (still down a quarter point). Treasuries have lost a bit more ground with 10yr yields up 7.4bps now at 3.569.