Bonds sold off only for a few minutes following the 10am ISM data but quickly reversed course and made modest gains into the noon hour. Most of this positive/resilient momentum is a factor of "new month" tradeflows, but Fed speakers and technicals/momentum have helped.
Most recently, it was the Fed's Kaplan with the following:
- FED'S KAPLAN SAYS HE IS FOCUSED ON NOT BEING PRE-DETERMINED ABOUT THE FUTURE PATH OF RATES
- KAPLAN SAYS HE IS PAYING ATTENTION TO SLOWDOWN IN GLOBAL GROWTH, AND EXPECTS U.S. GROWTH TO SLOW NEXT YEAR
- FED'S KAPLAN SAYS 'WE ARE IN A MORE CHALLENGING PERIOD' IN OUR EFFORTS TO NORMALIZE MONETARY POLICY
Any time we have a Fed member calling attention to a "slowdown in global growth" and moreover to an anticipated slowdown in the US, it tends to be good for rates. His mention of a "more challenging period" reflects the approach of a shift in Fed policy--also good for rates in the current environment where Fed policy has been to steadily hike rates.
10yr yields are back down into positive territory at 2.99%. With that level in mind, we can also assume some technical buying is in play. There are several pivot points around 3.0% (starting all the way up at 3.03%) that have resulted in stronger bond buying. Fannie 4.0 MBS are also back in positive territory, now up 1/32nd at 100-22 (100.69).