Prices

Weaker After PCE Data, But it Could Have Been Worse PCE Inflation data has been relegated to an “occasional and modest” market mover in the current environment.  Traders have been doing whatever they need to do in response to the comparable CPI data that comes out much earlier in any given month.  But exceptions are made for PCE data that sings a decidedly different tune, such as today’s.  It matched a decades-high reading at the core level (month-over-month) and thus sent yields higher.  Despite the unpleasant motivation and the 10yr almost hitting 4.0%, things definitely could have been worse.  If traders were determined to squeeze rates highs as fast as possible, it didn’t show up in today’s fairly moderate selling pressure (not to mention the afternoon recovery). Econ Data / Events Core PCE Prices m/m 0.6 vs 0.4 f’cast, 0.4 prev Core PCE Prices y/y 4.7 vs 4.3 f’cast, 4.6 prev pre month revised up 0.2 Consumer Sentiment 67.0 vs 66.4  New Home Sales  670k vs 620k f’cast, 625k prev Market Movement Recap 08:36 AM Slight weaker overnight with additional losses after PCE data (not extreme though). MBS down a quarter point and 10yr up 3.5bps at 3.924 09:53 AM Weakness back on track with another 2 steps backward after a brief step forward right after the initial sell-off.  MBS down half a point.  10yr up 5.5bps at 3.945 02:40 PM Bonds hit weakest levels around 1pm and have bounced back slightly.  MBS down only 3/8ths.  Treasuries are underperforming, up 6bps on the day at 3.95% 05:04 PM MBS drifted modestly stronger into the close, ending the day down only 10 ticks (.31).  10s stayed mostly sideways, rising 5.7bps on the day to 3.947.