MBS RECAP: Fed’s Offsetting Penalties Leave Bonds Little-Changed


Posted To: MBS Commentary

The overnight session was very quiet for bonds with most major markets closed for various holidays. The first meaningful movement followed the ISM Manufacturing report's major miss (52.8 vs 55.0). This was the lowest since October 2016 and several internal components were at longer-term lows as well. Bonds rallied several bps and then locked in to a sideways approach before the Fed. The announcement itself was slightly dovish . The Fed removed its reference to energy prices being an explanation for low inflation. It retained its "patient" verbiage, and it didn't directly mention that foreign economic risks had subsided. Bonds rallied a bit more as a result. But during Powell's press conference, the Fed Chair said that there was indeed slightly less risk posed by foreign…(read more)

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