Month-End Volatility, But No Bearing on Bigger Picture

It was a deceptively interesting Friday for the bond market with month-end trading creating volatility that seemed relevant at first glance.  Those trades easily overshadowed the calmer market movement seen in the morning hours following the PCE data, but that was a very low bar.  In the grand scheme of month-end trading days (especially those that fall on the Friday before a 3 day weekend), today’s volatility was average. Next week holds far more promise to shape the debate over a 25 vs 50bp Fed rate cut and, consequently, the next big move for the bond market.

Econ Data / Events

M/M Core PCE

0.2 vs 0.2 f’cast, 0.2 prev

Y/Y Core PCE

2.6 vs 2.7 f’cast

Chicago PMI

46.1 vs 45.5 f’cast, 45.3 prev

Consumer Sentiment

67.9 vs 68.0 f’cast, 66.4 prev

1yr inflation expectations

down 0.1%

Market Movement Recap

08:51 AM Flat overnight and modestly/paradoxically weaker after PCE data.  MBS down 3 ticks (.09) and 10yr up 1.7bps at 3.878

12:20 PM small but quick selling pressure just now with 10yr up 3.2bps at 3.893.  MBS down 5 ticks (.16) on the day. 

04:17 PM Sharply weaker in the PM hours and now recovering a bit after month-end trades run their course.  MBS down 3 ticks (.09) and 10yr yields up 4.1bps at 3.903