Bonds have given back a bit since this morning. UMBS 5.0 has drifted to 98.66 — down about 8 basis points from the 98.74 morning peak — and the 10-year Treasury yield has nudged up to 4.382%. The quoted 30-year rate edges slightly better at 6.53%.

Morning's PCE-driven rally has settled into a tighter range as the session progresses. The initial bond enthusiasm was real — on-target inflation is a clean signal — but midday liquidity tends to thin the bid as traders digest the move. Eight basis points off the high isn't alarming; it's the market finding equilibrium. The net gain from yesterday's close is still +0.15 on UMBS 5.0, so today remains a positive session. The PCE story hasn't changed — this is compression, not reversal.

— David Burson, NetRate Mortgage