MBS Outperform After Powell Discusses The Fed’s Outlook

The Fed stuck closely to the script in today’s announcement, barely changing any verbiage and delivering the expected 75bp rate hike.  Markets found more to chew on during Powell’s press conference.  The net effect was a strong performance for MBS (nearly half a point of improvement) with a reversal back to nearly unchanged levels for 10yr Treasuries.  Shorter-dated Treasuries fared better.  Today’s video explains why and provides a thorough run-down of all the rest of today’s movement.  

Econ Data / Events

Durable Goods 1.9 vs -0.5 f’cast, 0.5 prev

Pending Home Sales -8.6 vs -1.5 f’cast, +0.4 prev

Market Movement Recap

08:53 AM Fairly flat start with a quick, shallow rally heading into the 8:20am CME open.  Quick pull-back after Durables data, but still in slightly stronger territory with 10s down 2bps and MBS up an eighth.

10:51 AM Decent AM gains after initial volatility.  10yr down 3.6bps at 2.765 and MBS up more than a quarter point at 100-27 (100.85).

02:20 PM Minimal reaction to minimally-changed Fed announcement (75bp hike as expected).   MBS and Treasuries are both exactly in line with levels from the previous update. 

03:24 PM Nice rally during Powell press conference, but pulling back a bit now.  10yr down 3.6bps at 2.768 and MBS up 3/8ths of a point at 100-30 (100.94).

04:45 PM Weakness was/is centered on longer-dated Treasuries while MBS have been outperforming.  4.5 coupons are near day’s best levels at the close, up nearly half a point.