Another Day, Another Sell-Off Bonds may not have sold off in an overly excessive manner today, but they sold off nonetheless. In other words, rates went higher. The early culprits were twofold: a surprisingly hot Producer Price Index and some comments from Fed’s Mester on the prospect of a 50bp rate hike. Then in the afternoon, Fed’s Bullard said similar stuff and went a step further, saying he wouldn’t rule anything out for the next meeting. All this after Fed members spent the past 3 weeks sounding unified on “25bps is all we need.” The sudden shift in tone spooked bonds a bit, but it’s still up to data to drive the decision. Fed Funds Futures suggest we haven’t yet seen enough data to price in a 50bp hike. The result is intraday volatility that gives way to moderate additional weakness. Econ Data / Events Jobless Claims 194 vs 200 f’cast, 195 prev Core Producer Prices M/M 0.5 vs 0.3 f’cast Philly Fed -24.3 vs -7.4 f’cast, -8.9 prev Housing Starts 1.309m vs 1.360m f’cast, 1.371m prev Fed’s Mester: SAW A ‘COMPELLING’ CASE FOR 50 BPS HIKE AT LAST FOMC MEETING Market Movement Recap 08:56 AM Flat overnight and weaker after data and Fed’s Mester. 10yr up 2.7bps at 3.832. MBS down just under a quarter point. 09:44 AM Additional selling momentum in Treasuries with 10yr up 5.6bps at 3.859. MBS down just over a quarter point. 12:45 PM Nice bounce back underway since 10am. MBS down only 2 ticks (0.06). 10yr up only 3.5bps at 3.838 (down from 3.869). 03:09 PM Some quick selling pressure after Bullard comments on 50bp hikes. 10yr up 5.2bps at 3.855. MBS down just over a quarter point.