How Did Powell Bring The Pain With As-Expected Remarks?
This morning, we said the bond market appropriately and accurately priced in Powell’s Jackson Hole speech ahead of time, but the 3.6% losses in the S&P raise some questions. In other words, stocks don’t look like they were as clairvoyant as bonds. One conclusion is that bonds may indeed have been a bit bummed by Powell’s bluntness, but then managed to pick up a few buyers as the fled from the stock market seeking safer havens. Fully expected or not, Powell’s message was entirely on-brand for all the recent Fed comments in August, including his own comments in the July 27th press conference.
Econ Data / Events
PCE Price Index
-0.1 vs +1.0 prev
0.1 vs +0.3 f’cast, 0.6 prev
Y/Y Core PCE
4.6 vs 4.7 f’cast, 4.8 prev
Market Movement Recap
08:37 AM Modestly weaker overnight and little-changed after decent PCE inflation data. MBS are still down an eighth, and 10yr yields are up 2bps at 3.05 after being as high as 3.086 overnight.
11:25 AM Volatility before and after Powell’s speech. Treasuries near unchanged on the day (closer to best levels of the day). MBS have seen huge illiquidity at times. Prices are technically down 3/8ths, but trades are more likely to be executed closer to unchanged levels or a few ticks below.
04:25 PM New Lows of the day for MBS (factoring out late morning illiquidity). 4.5 coupons down 10 ticks (.31) at 99-29 (99.91). 10yr yields doing better, holding near lows and currently unchanged at 3.032.