Ready For Anything After Pre-CPI Consolidation

Bonds were arguably consolidating ahead of last Friday’s jobs report with the reaction representing a bit of a bullish breakout.  Since then, there’s been a quick and obvious re-consolidation back in line with last week’s M-Th levels. Today added to that process with most of the selling taking place by the start of the US trading session. Perhaps some of the selling has been an attempt to make room for this week’s Treasury auctions, but there’s no question that Wednesday morning’s CPI data is the last significant piece of the puzzle that the Fed will receive before deciding “to cut or not to cut” next week.  The market knows this, of course.  As such, a big deviation from forecasts would definitely be enough to get things moving.

Market Movement Recap

09:13 AM Modest weakness overnight. MBS down 5 ticks (.16) and 10yr up 2.7bps at 4.225.

12:50 PM MBS sideways, still down 5 ticks (.16). 10yr up 4bps at 4.239.

03:23 PM Some strength in PM hours.  MBS down 2 ticks (.06) and 10yr up 2.4bps at 4.223