Powell Press Conference Trumps The Dots, Sparking Moderate Sell-Off
Of today’s Fed events (rate announcement, dot plot, and press conference), it was the dots that were most likely to cause the biggest reaction. That proved to be the case, but only for the 30 minutes leading up to Powell’s presser. Bonds had already begun pushing back against the rally by the time Powell started fielding questions. Several of his responses added fuel to the fire. In not so many words, Powell said the dots don’t mean the Fed is cutting twice more in 2024 and that the Fed will instead be taking things meeting by meeting as they digest incoming econ data. While that’s very standard for the Fed playbook, it didn’t convey the level of concern for the economy (bullish for rates) that the market was priced for. The reversal seems extreme in the short term due to the dot-driven rally, but yields closed no higher than they did last Tuesday–2 days after the jobs report rally that took rates to their lowest levels since October.
Econ Data / Events
Building Permits (Aug)
1.312M vs 1.37M f’cast, 1.362M prev
Housing starts number mm (Aug)
1.307M vs 1.37M f’cast, 1.428M prev
Market Movement Recap
09:48 AM Modestly stronger overnight and little-changed so far this morning. MBS up 1 tick (.03) and 10yr down half a bp at 4.027
11:34 AM Just barely weaker now. MBS down 1 tick (.03) and 10yr up less than half a bp at 4.035
02:06 PM Stronger after the dot plot. MBS up just over an eighth and 10yr down 3.3bps at 3.998
02:40 PM MBS now down 2 ticks (.06) on the day. 10yr yields are up 2.3bps at 4.053
02:56 PM MBS now down a quarter point on the day and 10yr up 5bps at 4.08
