MBS Fully Recover After Initial Reaction to Inflation Data

MBS Fully Recover After Initial Reaction to Inflation Data There's no question that this morning's PPI data hit the bond market. The volume spike was easily higher than that seen with yesterday's CPI and the market movement left nothing to the imagination. In the big picture, a few bps of weakness in bond yields isn't that alarming, but if we consider PPI isn't usually a big deal and that yields were already pushing recent highs, things begin looking more meaningful. Despite the initial reaction, bonds found their footing after 11:30am. 10yr yields made it almost all the way back to pre-data levels and MBS fared even better--ultimately turning green around 2pm.  Econ Data / Events Core PPI m/m (Apr) 1.0% vs 0.3% f'cast, 0.1% prev Core PPI y/y (Apr) 5.2% vs 4.3% f'cast, 3.8% prev PPI m/m (Apr) 1.4% vs 0.5% f'cast, 0.5% prev PPI y/y (Apr) 6.0% vs 4.9% f'cast, 4% prev Market Movement Recap 08:38 AM MBS down 3 ticks (.09) and 10yr up 3.2bps at 4.484 11:39 AM MBS down an eighth and 10yr up 3bps at 4.483 02:16 PM Nice bounce for MBS, now back to + 1 tick (.03) on the day. 10yr still up 2.7bps at 4.48