Calm and Resilient as Bonds Wait For Powell and The Dot Plot

Whereas last week saw the bond market continue selling off without overt provocation, the first two days of the present week have seen far more equanimity and even resilience. Today’s example involved a modest rally following a mixed bag of Retail Sales data.  Bonds didn’t move much after recovering overnight losses, so now it’s on to tomorrow’s Fed announcement.  Markets know the Fed will cut and that the dot plot (aka rate outlook survey that’s updated 4 times per year and closely watched by bonds) will show a higher rate trajectory than September.  We also know Powell should sound a lot like his last few public appearances.  What we don’t know is how gloomy of a dot plot or how hawkish of a Powell the market is willing to accept.  At the risk of jinxing it, this Fed meeting doesn’t feel nearly as consequential as September, but could nonetheless help set the tone into the end of the year. 

Econ Data / Events

Retail Sales

0.7 vs 0.5 f’cast, 0.4 prev

Retail Sales excluding autos

0.2 vs 0.4 f’cast, 0.2 prev

Market Movement Recap

08:41 AM modestly weaker overnight and little-changed after mixed retail sales data.  MBS down an eighth and 10yr up 3bps at 4.429

12:46 PM MBS up 1 tick (.03) and 10yr down 1.9bps at 4.382

02:08 PM MBS unchanged and 10yr down 1.7bps at 4.384

03:42 PM Losing ground slightly.  MBS down 1 tick (.03) and 10yr down less than half a bp at 4.397