Sideways Afternoon After Volatile Morning
“Hypervigilant volatility.” Get used to seeing that new phrase as it aptly describes traders’ reactions to whatever the most compelling indicator may be at any given moment. Aren’t traders always responding to market movers? Well, yes, but in the current case, rates have have been broadly sideways at super long-term highs for 4 months and traders are undecided about what the next big departure from that trend will look like. They only know it will be driven by data, so data is getting scrutinized and often traded more actively than it otherwise would be.
Econ Data / Events
FHFA Home Prices
16.2 y/y vs 18.3 prev
+0.1 m/m vs +1.3 prev
Case Shiller Prices
+18.6 y/y vs +20.5 prev
+0.4 m/m vs +1.2 prev
103.2 vs 97.7 f’cast, 95.3 prev
Market Movement Recap
08:35 AM Gains at 4am on regional declines in German inflation. 10yr as low as 3.05 overnight. Bouncing back after headline German CPI hits f’cast and Fed’s Barkin says doesn’t expect inflation to come down predictably. 10yr down 3bps at 3.08 and MBS up an eighth of a point.
09:18 AM Bonds back to unchanged levels after comments from Fed’s Barkin and ECB officials (weaker momentum noted in last update continued).
10:20 AM Back to weakest levels of the day after stronger consumer confidence data and more hawkish ECB comments. MBS down an eighth on the day and a quarter point from highs.
02:45 PM MBS clawing back some losses, but still down an eighth on the day. 10yr yields recovered into the noon hour and have been flat at just slightly higher levels (3.115%).