Bullets Dodged

Bullets Dodged We've seen our fair share of bonds punishing the market on occasions where bond traders were forced to worry about a significant change in a fiscal or monetary regime (or the absence of a desired change). Wednesday's reaction to the Fed ran the risk of setting the stage for similar momentum. While it did technically continue, it was far less forceful on Thursday. Additionally, the evidence was limited to curve steepening rather than outright losses (apart from 30yr bonds). In short, bonds fired a warning shot, but they're not going to obsess about it unless given additional reasons. Econ data was plentiful this morning, but had little impact on trading levels. Oil/fuel price correlations remain and should continue to provide guidance for bonds until war-related volatility is in the rearview. Econ Data / Events Continued Claims (Jul)/18 1,782K vs 1800K f'cast, 1796K prev Core PCE (m/m) (Jun) 0.1% vs 0.2% f'cast, 0.3% prev Core PCE (y/y) (Jun) 3.3% vs 3.3% f'cast, 3.4% prev GDPQ2 1.5% vs 2.1% f'cast, 2.1% prev Jobless Claims (Jul)/25 197.0K vs 200K f'cast, 187K prev PCE (y/y) (Jun) 3.7% vs 3.7% f'cast, 4.1% prev PCE prices (m/m) (Jun) -0.1% vs -0.1% f'cast, 0.4% prev Market Movement Recap 08:34 AM Modestly stronger overnight and no major reaction to data. MBS up 1 tick (.03) and 10yr unchanged at 4.68 12:48 PM MBS up 5 ticks (.16) and 10yr down 2.3bps at 4.657