Tuesday Was Tame, But Wednesday Probably Won’t Be

Tuesday’s trading session was boring, with rates hitting domestic hours at slightly higher levels and then holding almost perfectly flat for the duration.  This morning’s commentary discussed the possibility that Wednesday’s CPI data could end up looking anticlimactic after a few days.  But even though there are some good reasons to doubt CPI’s ability to dictate a longer-lasting trend for bonds in the coming weeks, there’s no denying it has tremendous potential to cause volatility in the short term.  

Econ Data / Events

Q2 Labor Costs

10.8 vs 9.5 f’cast, 12.7 prev

Q2 Productivity 

-4.6 vs -4.7 f’cast, -7.4 prev

Market Movement Recap

08:25 AM Stocks and bonds steadily and modestly weaker overnight.  Most of yesterday’s domestic session gains erased.  MBS down 3/8ths and 10yr yields up 5.5bps to 2.805.

11:16 AM Sideways at slightly weaker levels (no major change from previous update and no obvious motivations for better or worse).  Illiquidity is a bigger factor today compared to yesterday for MBS, likely due to the roll for 30yr UMBS.

02:32 PM Still sideways at similar levels.  No major impact from 3yr Treasury auction.  10yr yields up 4.8bps at 2.797.  MBS down 11 ticks (.34).