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Focusing only production MBS coupons and longer-term Treasuries, the bond market is off to another slow, sideways start today with minimal change versus yesterday.  With all of this morning’s data now reported, we’ve seen no measurable impact on bonds.  The overnight session was a different story but not due to econ data.  Rather, bonds responded to Trump’s firing of Fed Governor Cook (a process that is more complicated than it sounds) with a steepening of the yield curve (2yr yields moved lower versus 10yr yields). The steepening is consistent with the view that Cook’s replacement would be that much more supportive of an aggressive rate cut outlook (2yr Treasuries have more in common with the Fed Funds Rate than 10yr Treasuries). This isn’t a major shift in the bigger picture and it remains to be seen how Cook’s firing will actually play out.

Last week may have ended on a high note with bonds rallying on Powell’s Jackson Hole speech, but perception was better than reality at the time. The reality was/is that Friday’s rally merely reinforced the trading range that has been ongoing since the August 1st jobs report. At the present pace and considering the econ calendar in the week ahead, we could be waiting for next jobs report before seeing a meaningful challenge to that range (roughly 4.20-4.35 in 10yr yields). This week’s key event is Friday’s PCE inflation. Even if it doesn’t tend to move markets as much as other reports, it’s important confirmation.  It’s also worth more to the Fed when it comes to making a September rate cut decision.