Tame Inflation and Tillerson Usher Bonds to Week’s Best Levels

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Bond markets moved to their best levels in more than a week on a combination of tame inflation data and Trump’s unexpected announcement of Rex Tillerson’s departure from the White House.  

In looking at the inflation data, we could make a case for bonds two ways.  First, today’s Consumer Price Index (CPI) was not stronger than expected on any line item unless you want to say that last month’s -0.8% change in inflation-adjusted earnings was revised to -0.6.  Second, and perhaps more importantly, the un-rounded number of 0.0151% nearly made for a headline of “0.1% vs 0.2% forecast.”  

“Nearly” wasn’t worth too terribly much for bond markets, as they didn’t rally profoundly right out of the gate.  We can’t really know how much of a rally we would have seen, however, because Tillerson’s ouster hit the newswires just a few minutes later.  Markets traded that in “risk-off” fashion (sell stocks, buy bonds).  

The gains were short-lived as investors pushed back on the lowest 10yr yields since March 5th.  On the plus side, the weakness never gained too much momentum, and bonds got another shot following a decent 30yr bond auction in the afternoon.  The auction motivated some more curve flattening trades (sell 2yr bonds vs buy/hold 10-30yr bonds), but just as relevant was the stock market weakness that increased into the close (more “risk-off” support for bonds).


MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS

FNMA 3.5

99-24 : +0-02

Treasuries

10 YR

2.8444 : -0.0256

Pricing as of 3/13/18 4:55PMEST

Today’s Reprice Alerts and Updates

1:12PM  :  Mixed Bag 30yr Auction; Limited Reaction so Far

10:17AM  :  ALERT ISSUED: Negative Reprice Risk Increasing

8:59AM  :  Tillerson Ouster Boosts Bonds Temporarily

8:36AM  :  CPI Largely As-Expected; Bonds Still Trying to React


MBS Live Chat Highlights

Matthew Graham  :  “B”

Matthew Graham  :  “RTRS – U.S. 29-YEAR 11-MONTH BOND BID-TO-COVER RATIO 2.38, NON-COMP BIDS $4.43 MLN”

Matthew Graham  :  “RTRS – U.S. SELLS $13 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.109 PCT, AWARDS 38.47 PCT OF BIDS AT HIGH”

Brent Borcherding  :  “Missile Launch”

aaron meyer  :  “JT what can get us below 2.79?”

John Tassios  :  “professor MG, i’m looking for another “A” grade today at 1:00″




Original Source