Not as Bad as it Could Have Been
Fri, Dec 20 2024, 4:44 PM
After Wednesday’s Fed-driven sell-off, it was unlikely if not impossible that bonds wouldn’t end up saying they had a bad week. That is certainly still the case, but after Friday, it’s not as bad as it could have been. PCE inflation came in at 0.1% at the core level, month over month. If inflation repeated that performance for 12 months, annual inflation would be below the 2.0% target. Headline inflation is even lower and has been doing even better in terms of getting back to a target trajectory. Bond traders are largely able to price in PCE data because a good amount of it can be calculated from CPI/PPI which come out 2 weeks earlier. There was still enough of a surprise for 10yr yields to drop a quick 6bps and ultimately end the day 4bps lower than yesterday.
- M/M Core PCE
- 0.1 vs 0.2 f’cast, 0.3 prev
- Y/Y Core PCE
- 2.8 vs 2.9 f’cast, 2.8 prev
- M/M Core PCE
09:25 AM
Slightly stronger overnight with additional gains after PCE data. MBS up 11 ticks (.34) and 10yr down 6.8bps at 4.503
01:14 PM
Generally stronger, but off the highs. MBS up 10 ticks (.31) and 10yr down 6.4bps to 4.507
01:52 PM
Down just over an eighth from highs in MBS. 10yr down 6bps at 4.511
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