Bonds Reprise Familiar Role as a Safe Haven Amid Renewed Rout in Stocks

You’ve seen it plenty of times so far in 2025. You’ve wondered what the heck happened to it during last week’s volatile tariff announcement aftermath. Now today, more than any other day this week, a good, old-fashioned flight to safety helped the bond market realize some decent gains. Powell’s speech at 1:30pm ET was the clear catalyst, with warnings for the economy and reassurances for the bond market’s smooth functioning. At this point, bonds are right back in line with the flat, narrow range seen between late February and late March. 

Econ Data / Events

Retail Sales 

1.4 vs 1.3 f’cast, 0.2 prev

Retail Sales Control Group

0.4 vs 0.6 f’cast, 1.3 prev

Market Movement Recap

08:42 AM sideways to slightly stronger overnight.  Minimal reaction to data.  MBS up 1 tick (.03) and 10yr down 0.4 bps at 4.33

10:47 AM 5.5 UMBS are now down 1 tick (0.03) on the day and 10yr yields up 1.2bps at 4.348

01:51 PM Some volatility surrounding Powell, but holding gains, mostly.  MBS up an eighth on the day and 10yr down 2.8bps at 4.308

02:40 PM Stronger during and after Powell.  MBS up 7 ticks (.22) and 10yr down 5.8bps at 4.278

Inflation, via this morning’s PCE price index, came in slightly hotter than expected, but bonds are rallying in response. There are a few ways to approach this paradox both in the long and short term.  On a more nitty gritty level, the unrounded PCE numbers were fairly close to consensus and that can always help mitigate unfriendly data. In the bigger picture, we can consider a few other factors. On a data-related note, annual PCE (non-core) stayed at 2.5% vs 2.5%–not too terrible considering a 2.0% target. Data aside, we can also consider the gap that we’ve discussed several times this week and the fact that bonds could simply be rallying because it was finally filled yesterday.