UMBS are up 5 bps on the open.  Though down 6 bps from the highs on the day.  S&P futures are up 23.5 points

Last night was the first US Presidential Debate.  I didn’t watch it, but I know that YOUR candidate definitely won.

Stock futures rose and bond yields fell as a cooldown in the Federal Reserve’s preferred inflation gauge reinforced bets policymakers will have room to cut rates this year.

Core M/M PCE = 0.1 vs 0.1 f’cast

last month revised to 0.3 from 0.2

Core Y/Y PCE = 2.6 vs 2.6 f’cast

Right on target, but the confirmation of inflation progress is worth a bit of a relief rally for bonds.

Personal incomes rose 0.5% MOM in May, beating the 0.4% estimate. Spending came in light however, rising only 0.2% versus expectations of 0.3%.    Importantly, the PCE Price Index was flat, after rising 0.3% the past 3 months.

Fed Bank of Richmond President Thomas Barkin said the inflation battle still hasn’t been won, and the US economy is likely to remain resilient as long as unemployment remains low and asset valuations high. He spoke Friday before the PCE data.

Pending Home Sales fell 2.1% in May, according to NAR. On a YOY basis, they fell 6.1%.

Things looked good for the bond market earlier this morning.  While yields were still quite a bit higher than those seen earlier in the week, there was an immediate, positive response to the on-target PCE data.  The gains didn’t last long with sellers running the table mostly between 10am and 11am ET.  While some of the move could be due to traders moving to the sidelines ahead of near-term potential political developments, month/quarter-end positioning likely had a much bigger impact.  Bonds ended the week at their weakest levels, but this pull-back doesn’t inform next week’s trading in the slightest.  That honor goes to the active slate of bigger ticket economic data.

4.29% is broken as technical ceiling, yet again, but we’d hesitate to read much into that considering the month/quarter-end trading day.  The upcoming week will provide a better sense of prevailing momentum, but the biggest reports (like NFP and CPI) can always cause abrupt reversals.

UMBS closed the day down 37 bps!  At 100.17