In today's update on September 29th, Mortgage-Backed Securities (MBS) gained 16 basis points, with S&P futures up 30.25 points. European bonds strengthened due to low EU inflation and steep declines in German import prices.

PCE data initially rallied but later fluctuated, possibly due to a core monthly figure close to expectations.

• Core PCE m/m: 0.1 vs. 0.2 forecast, 0.2 previous
• Core PCE y/y: 3.9 vs. 3.9 forecast, 4.3 previous
• Personal Spending: +0.4% MoM vs. 0.5%

The likelihood of a government shutdown looms, with minimal actual impact expected.

Consumer sentiment decreased in September, with moderating inflation expectations, offering a positive sign.

Bonds improved overnight, navigating uncertainty around the shutdown and month-end tradeflows, as the most crucial data week approaches without key reports.

Bonds ended the day down 11 basis points, marking a 38 basis point drop from the day's highs.

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MBS are down 17 bps on the open - again.  S&P futures up 15.25

Much like yesterday, bonds were stronger in the overnight session as European investors have been willing to "buy the ceiling" in EU bond yields.  A smattering of slightly weaker economic reports helped the cause.

Econ data is out in the US as well, but it's not having the same logical impact.  Bonds have actually improved slightly since the Durable Goods data came out.  What's up with that?  The shortest, simplest answer is that this report hasn't been a reliable or potent market mover lately.

Durable Goods = 0.2 vs -0.5 f'cast  [-5.6 prev] - mostly based on defense spending.

Nondefense, excluding aircraft = 0.9 vs 0.0 f'cast  [-0.4 prev]

Minneapolis Fed President Neel Kashkari said that a government shutdown / drawn-out strike with the UAW could act to lower inflation and reduce the need for the Fed to hike further.  The Senate advanced legislation which could help prevent a government shutdown, however House Speaker Kevin McCarthy is still dealing with members who want increased funding for the border. Another major sticking point is funding for Ukraine.

We've been here before and we'll be here again, but each time feels like a surprising new twist on what we think we know about bond market motivations.  The key word is "repricing," and we're not talking about lender rate sheets.  In this context, repricing refers to a broad understanding among certain market participants that rates need to move higher than they're reasonably able to move in one trading day.  This results in seemingly paradoxical weakness that's not obviously connected to data or events in a timely way.  Granted, data and events can help explain the weakness, but only in hindsight.  In other words, this is the type of selling momentum that sends analysts looking for explanations as opposed to the type that follows logically from new developments in data and events.

MBS closed the day down 34 bps on the 6.0 coupon.  Ending at 98.41