The tone and trend remain uneventful in the bigger picture, but Treasuries managed to rally modestly in the overnight session thanks to a slightly better rally in EU bonds. There wasn’t much to that rally either as EU bonds are also just grinding sideways with no major volatility.

MBS are up 6 bps early. Stocks down 14 points

Chip stocks are down this morning after a report that the Biden Administration is considering curbs on AI chip exports to China. The recent rally in the stock market has been incredibly narrow, focusing on a few AI-driven stocks.

Jerome Powell is speaking on a panel of central bankers in Europe this morning. I don’t expect anything market-moving, but just be aware. The Fed will release the results of bank stress tests after the close today. The markets will focus particularly hard on the regional banks.

Compared to 2019, TSA reports airline travel is back to its 2019 level and has been so since the start of 2023. As for hotel occupancy, it’s now equal to the 2000-2022 median, but slightly below the 2018 record. Gasoline consumption is running at about 95% of 2019 levels, and gross movie box office ticket revenues are close to the 2016-2019 median. The economy continues to steadily return to normal.

Unlike yesterday, bonds didn’t have any market moving economic reports to provide guidance in the morning.  Instead, traders were a bit apprehensive ahead of the SINTRA conference in Europe as the heads of the world’s two largest central banks were slated to comment on monetary policy (jargon translation: “headline risk”). As the headline risk faded (Powell and Lagarde didn’t say anything too scary), bond buyers filed back into the market, ultimately ushering yields to new lows in the afternoon hours.

MBS closed up 19 bps.  Stocks lost 2 points