Today turned out to be a dud, thanks to a completely uneventful CPI reading as well as a right-down-the-middle 30yr bond auction. Neither of these events were necessarily destined to shake things up, but CPI certain COULD have (if it fell far from forecast).
When it comes to tomorrow’s Fed events (which include updated forecasts and a Powell Press Conference), we can assume that there are enough trading ideas hinging on the event that it will be impossible to avoid a volatile reaction. The least volatile outcome would probably be a knee-jerk that ends up leaving bonds in relatively unchanged territory. If that ends up happening, the ECB will be out on Thursday morning to see about getting some momentum going. Either way, the moral of the story is that we’ve reached this week’s big volatility potential as of 2pm tomorrow.
As a point of order, keep in mind that we already know the Fed will hike rates. The hike is priced-in. We don’t yet know how the Fed’s rate hike outlook will evolve, or how Fed Chair Powell may answer questions at the press conference that follows the announcement. Those are the market movers, in addition, perhaps, to any notable changes in the verbiage. If I had to rank them, I’d put the rate hike outlook at the top of the pile (that comes out at 2pm)
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
101-16 : -0-01
2.9645 : +0.0075
|Pricing as of 6/12/18 5:10PMEST|
Today’s Reprice Alerts and Updates
1:19PM : Unsurprisingly Unchanged After 30yr Auction
8:38AM : Little-Changed After As-Expected CPI
MBS Live Chat Highlights
Matthew Graham : “that’s entirely up to central bankers”
Jennifer Turner : “Anyone feel it’s likely we’ll see rate improvements this week? I have a couple to lock, thinking I should just lock ’em”
Eric Sayer : “I like it, more to chat about here on MBS Live”
Chris Stevens : “”The new Fed chairman is considering holding press conferences after each meeting to disrupt a pattern on when policy has changed.”- WSJ”
Matthew Graham : “B+, right down the middle”
Matthew Graham : “RTRS – PRIMARY DEALERS TAKE 27.49 PCT OF U.S. 29-YEAR 11-MONTH BONDS SALE, DIRECT 10.27 PCT AND INDIRECT 62.24 PCT”
Matthew Graham : “RTRS – U.S. 29-YEAR 11-MONTH BOND BID-TO-COVER RATIO 2.38, NON-COMP BIDS $7.07 MLN”
Matthew Graham : “RTRS – U.S. SELLS $14 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.100 PCT, AWARDS 81.29 PCT OF BIDS AT HIGH”
Matthew Graham : “30yr Bond Auction Preview: Recent average bid-to-cover has been around 2.4x, the 1pm when-issued yield (expectation) was just under 3.10. Indirect bids have been just over 60%”
Sung Kim : “what a great biz, we get to learn about immigration law, tax law, financial markets, interpersonal communication, one-stop shop”