MBS Live Morning: Negative GDP Reading Not Enough to Inspire a Bond Rally
MBS Live Morning: Negative GDP Reading Not Enough to Inspire a Bond Rally
Yesterday, we surmised that the absence of new rally momentum meant rates weren't yet ready to confirm a major ceiling without digesting a bit more data as well as next week's Fed announcement. While Friday's PCE inflation is this week's headline of choice, today's GDP wasn't far behind. The results were mixed depending on how you want to view them. Most of the data was upbeat, but steep declines in exports/imports and inventories took the headline into negative territory. That was worth a brief rally for bonds, but not one that was big enough to undo overnight weakness.
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Yesterday, we surmised that the absence of new rally momentum meant rates weren't yet ready to confirm a major ceiling without digesting a bit more data as well as next week's Fed announcement.ย While Friday's PCE inflation is this week's headline of choice, today's GDP wasn't far behind.ย The results were mixed depending on how you want to view them.ย Most of the data was upbeat, but steep declines in exports/imports and inventories took the headline into negative territory.ย That was worth...
Yesterday, we surmised that the absence of new rally momentum meant rates weren't yet ready to confirm a major ceiling without digesting a bit more data as well as next week's Fed announcement.ย While Friday's PCE inflation is this week's headline of choice, today's GDP wasn't far behind.ย The results were mixed depending on how you want to view them.ย Most of the data was upbeat, but steep declines in exports/imports and inventories took the headline into negative territory.ย That was worth...
Big Bond Rally to Start The New Week
In spite of potential headwinds in the coming days (CPI data and Treasury auctions, specifically), bonds are off to the races so far this week.ย That wasn't destined to be the case in the overnight session as 10yr Treasury yields hit new long-term highs of 3.20%, but things only improved from there.ย Another big drop in stocks helped fuel some safe-haven demand.ย Lower oil prices didn't hurt.ย We can also consider...
Big Bond Rally to Start The New Week
In spite of potential headwinds in the coming days (CPI data and Treasury auctions, specifically), bonds are off to the races so far this week.ย That wasn't destined to be the case in the overnight session as 10yr Treasury yields hit new long-term highs of 3.20%, but things only improved from there.ย Another big drop in stocks helped fuel some safe-haven demand.ย Lower oil prices didn't hurt.ย We can also consider...
At the risk of repeating ourselves regarding bond market trends of the past few months, 2022's initial rate rout clearly gave way to something more 'sideways' in May.ย Even as yields seemed to be rallying, they were only doing so in the confines of what had to be a sideways trend.ย No over the past week, that trend was reinforced by a hard bounce off the floor.ย Call it 2.72% if you like.ย The weakness is sufficient to ask if it's already time to start considering ceiling levels for the side...
At the risk of repeating ourselves regarding bond market trends of the past few months, 2022's initial rate rout clearly gave way to something more 'sideways' in May.ย Even as yields seemed to be rallying, they were only doing so in the confines of what had to be a sideways trend.ย No over the past week, that trend was reinforced by a hard bounce off the floor.ย Call it 2.72% if you like.ย The weakness is sufficient to ask if it's already time to start considering ceiling levels for the side...
This is the "to be or not to be" question for the bond market right now.ย Said differently, have we suffered sufficient slings and arrowsย for investors to begin to believe that bonds have priced-in what hikes may come? While this inevitable correction is devoutly to be wished, nailing the timing and the duration of what may be a series of multiple corrections and false starts continues to be tantamount to catching the proverbial bare bodkin.ย Have we seen enough weakness by standards of the p...
This is the "to be or not to be" question for the bond market right now.ย Said differently, have we suffered sufficient slings and arrowsย for investors to begin to believe that bonds have priced-in what hikes may come? While this inevitable correction is devoutly to be wished, nailing the timing and the duration of what may be a series of multiple corrections and false starts continues to be tantamount to catching the proverbial bare bodkin.ย Have we seen enough weakness by standards of the p...
Not that there was any reason to doubt inflation as the key consideration in the bond market right now, but those looking for extra confirmation can easily find it in this morning's chart that shows inflation expectations plummeting after ceasefire headlines (the lines in the bottom half of the chart start dropping right when the ceasefire news hit).ย
De-escalation remains a double-edged sword for the bond market, however, with some unknown amount of demand in the market owing itself to ge...
Not that there was any reason to doubt inflation as the key consideration in the bond market right now, but those looking for extra confirmation can easily find it in this morning's chart that shows inflation expectations plummeting after ceasefire headlines (the lines in the bottom half of the chart start dropping right when the ceasefire news hit).ย
De-escalation remains a double-edged sword for the bond market, however, with some unknown amount of demand in the market owing itself to ge...
With it being the Monday after a 3.5 day weekend, with London closed, and no significant data on the econ calendar, today's marching orders are to act as a placeholder session. It won't necessarily follow those orders, but if any significant movement happens, it will have to draw inspiration from technicals and "new week" tradeflows after last Friday's sell-off was arguably fueled in large part by position squaring and/or profit taking.
The other way to look at it would be to view the 2 preced...
With it being the Monday after a 3.5 day weekend, with London closed, and no significant data on the econ calendar, today's marching orders are to act as a placeholder session. It won't necessarily follow those orders, but if any significant movement happens, it will have to draw inspiration from technicals and "new week" tradeflows after last Friday's sell-off was arguably fueled in large part by position squaring and/or profit taking.
The other way to look at it would be to view the 2 preced...
As feared, today's CPI data has proven to be the most capable market mover of the week, by a wide margin.ย Unfortunately, that volatility is playing out in an unfriendly direction due to the much hotter inflation reading.ย 10yr yields are well over the highs of the week, and not too far from the multi-year highs seen in early May.ย 2yr yields are even worse off (due to the data's implication for the Fed rate hike outlook).ย MBS started off with only moderate losses, but have now completely t...
As feared, today's CPI data has proven to be the most capable market mover of the week, by a wide margin.ย Unfortunately, that volatility is playing out in an unfriendly direction due to the much hotter inflation reading.ย 10yr yields are well over the highs of the week, and not too far from the multi-year highs seen in early May.ย 2yr yields are even worse off (due to the data's implication for the Fed rate hike outlook).ย MBS started off with only moderate losses, but have now completely t...
One side effect of following the market very closely during times of heightened volatility is that the short term developments on any given day run a high risk of contradicting the developments of the previous day.ย This is one reason that we have a longer term baseline, both for the trend in rates and for the targets required to consider a change in that trend.ย But headlines would get boring if every one was "______ today, but general trend continues."ย So instead we have headlines like "re...
One side effect of following the market very closely during times of heightened volatility is that the short term developments on any given day run a high risk of contradicting the developments of the previous day.ย This is one reason that we have a longer term baseline, both for the trend in rates and for the targets required to consider a change in that trend.ย But headlines would get boring if every one was "______ today, but general trend continues."ย So instead we have headlines like "re...
After a bumpy start to the week on Monday, the bond market is still trying to define a sideways range that serves as a waiting room where traders will eventually be given a long-term prognosis for the market.ย The critical events that determine that prognosis are yet to come.ย They include inflation data and the associated response of various central banks.ย At least those are the two biggest variables.ย In the meantime, things like Treasury auctions and non-inflation-related economic report...
After a bumpy start to the week on Monday, the bond market is still trying to define a sideways range that serves as a waiting room where traders will eventually be given a long-term prognosis for the market.ย The critical events that determine that prognosis are yet to come.ย They include inflation data and the associated response of various central banks.ย At least those are the two biggest variables.ย In the meantime, things like Treasury auctions and non-inflation-related economic report...
Depending on when you looked this morning, MBS prices may have been red or green, and the gap between any two quotes was rather large (a quarter of a point or more at times).ย This has to do with the ongoing deterioration of liquidity in the MBS market.ย The following chart explains this best.ย The green line is what buyers are willing to pay and the orange line is where sellers are willing to sell.ย The blue lean measures the gap between the two.ย The higher the blue line, the worse the
...
Depending on when you looked this morning, MBS prices may have been red or green, and the gap between any two quotes was rather large (a quarter of a point or more at times).ย This has to do with the ongoing deterioration of liquidity in the MBS market.ย The following chart explains this best.ย The green line is what buyers are willing to pay and the orange line is where sellers are willing to sell.ย The blue lean measures the gap between the two.ย The higher the blue line, the worse the
...