MBS RECAP: Bond Markets 'Reset' to Pre FOMC Levels After Jobs Report

By: Matthew Graham •

There is a disturbing lack of utter certainty when it comes to financial markets, and especially to the effect of economic data on MBS Prices.  Case in point, the last jobs report beat consensus by more than 20k, yet MBS rallied.  That was a mere 20k though...

Today's jobs report brought the kind of eye-watering departure from forecast results that we almost never see.  It therefore offered the sort of utter certainty we almost never enjoy.  Suffice it to say, a 108k miss in Nonfarm Payrolls is unequivocally good for bond markets, especially when they've been flat-to-weaker.

Treasury and MBS prices broke north with no delay.  10's plummeted from 2.96 to 2.89, retraced to 2.93 and then continued trending steadily lower.  They're presently slinking out the door just under 2.86. 

Fannie 4.0s underwent a similar 7 steps forward, 4 back, 15 more forward to current levels that are 26/32nds higher on the day at 103-23.  With just a few hours excepted, this pretty much wipes out all the weakness in December.  Of course it may simply come back again, but not today anyway, perhaps longer, depending on next week's data.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
95-28 : +1-01
FNMA 3.5
100-07 : +0-30
FNMA 4.0
103-24 : +0-26
Treasuries
2 YR
0.3739 : -0.0551
10 YR
2.8561 : -0.1089
30 YR
3.8008 : -0.0722
Pricing as of 1/10/14 4:36PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:49AM  :  Edging Up Into Positive Reprice Territory
8:37AM  :  ALERT ISSUED: Nonfarm Payrolls +74k vs +196k Forecast; HUGE Miss; Bonds Rallying Big
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sam  :  "CFPB announcement: http://mndne.ws/1dkfAzt"
Matthew Graham  :  "REUTERS POLL - FED TO PROCEED WITH ANOTHER $10 BLN TAPER TO U.S. BOND PURCHASE PROGRAM DESPITE DISMAL DEC JOBS REPORT "
Matthew Graham  :  "REUTERS POLL - FED TO TRIM MONTHLY BOND PURCHASES BY $10 BLN AT EACH FOMC MEETING NEXT YEAR -57 OF 61 ECONOMISTS "
Scott Garner  :  "It was reported that job growth the last 2 years was about the same. If that's the case, and the Fed has tied tapering to the labor market, why are we tapering now?"
Matthew Graham  :  "tapering is only MOSTLY about the labor market. It's partly about them wanting to be out for other reasons (limited efficacy from incremental increases and potential disruptions to proper market functioning). Also, Bernanke said in March 2013 that they're just looking for "near-term momentum." They wanted an ongoing average of 150k-250k jobs/month sustainably, and they got it, so = taper."
Economic Calendar
Time Event Period Actual Forecast Prior
Tuesday, Jan 14
8:30 Import prices mm (%)* Dec 0.3 -0.6
8:30 Retail sales mm (%)* Dec 0.1 0.7
8:30 Export prices mm (%)* Dec 0.1 0.1