More weakness. Is it the Federal Reserve?

More weakness. Is it the Federal Reserve?

Wed, Aug 24 2022 16:24

Bonds started the day in slightly stronger form, but began to sell off shortly after the 8:30am durable goods data. It is debatable whether this had much to do with the data itself or whether traders were simply waiting to sell bonds until they confirmed that the data was not horrible. If we’re considering possible reactions to the data, Pending Sales didn’t help coming in a bit stronger than expected at 10am The 5-year Treasury auction at 1pm added a bit more weakness, but only to the extent in which it kept bonds flat at the worst levels of the day. Looking beyond the data, we can see traders potentially bracing for the impact of Fed Chairman Powell’s Jackson Hole speech on Friday. Today’s video looks at the extent to which fed funds futures actually suggest any major changes.

    • durable products
      • 0.0 vs 0.6 above, 2.2 above
    • Non defense excluding aircraft
      • 0.4 vs 0.3 before, 0.7 before
    • Pending Home Sales
      • -1.0 vs. -4.0 Previous, -8.9 Previous


No change to slightly stronger overnight, but selling after the mixed durables headline. The move came from a few big trades more than 5 minutes after the data, so it wasn’t your typical data reaction. MBS was down a little over an eighth.


Selling continues with 10-year yields now above 5 bps, trading just below 3.11%. UMBS 4.5 coupons are down about a quarter of a point.


Some additional weakness around the 5yr Treasury auction but now back in line with previous levels.


Some ups and downs in the last few hours, but generally sideways in the second half of the day. 10-year yields remain at 3.11. MBS dropped a little less than a quarter of a point.

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