MBS MID-DAY: Bonds Swing From Losses to Gains After Manufacturing Data

By: Matthew Graham

Surprisingly and refreshingly, today's ISM Manufacturing data has been a clear source of motivation for trading activity today.  After it came out at the weakest levels since June, bonds rallied significantly and stocks fell sharply.  There's a chance that investors are sensing a negative shift in economic momentum as the ISM numbers were unable to break above an index value of 60.0, despite coming close in 3 out of the past 5 months.  Indeed, 59.3 is the highest reading since June 2004, but there have been 14 reports at 57.5 or higher.

15 minutes before the ISM data, the less-highly-regarding Markit PMI data offered a potential early indication of weakness in the manufacturing sector.  It came in at the lowest levels since January 2014, and bond markets seemed to react to that.  This is significant because Markit PMI doesn't frequently motivate much of a reaction.

Before that, the morning's only noticeable market mover was a big block trade in Treasury futures.  That served to stem overnight losses and kick off the day's first sign of positive momentum.  It got bonds back to neutral territory before the manufacturing data pushed them well into positive territory.  10yr yields are over 6bps lower at 2.107 and Fannie 3.0s are nearly half a point higher than Wednesday's latest levels.


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
101-21 : +0-13
FNMA 3.5
104-20 : +0-10
FNMA 4.0
106-30 : +0-05
Treasuries
2 YR
0.6650 : -0.0070
10 YR
2.1090 : -0.0613
30 YR
2.6820 : -0.0680
Pricing as of 1/2/15 11:28AMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:09AM  :  Now Well Into Positive Territory Following Weak ISM Data
9:30AM  :  Bond Markets Open Weaker, but Bounce Back After Block Trade

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING PMI AT LOWEST SINCE JUNE"
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING PRICES PAID INDEX 38.5 IN DEC (CONSENSUS 43.0) VS 44.5 IN NOV"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING ACTIVITY INDEX 55.5 IN DECEMBER (CONSENSUS 57.6 ) VS 58.7 IN NOVEMBER"
Matthew Graham  :  "Bit of a stretch, but we could be seeing potential early bets on ISM here."
Matthew Graham  :  "RTRS- MARKIT U.S. MANUFACTURING SECTOR PMI LOWEST SINCE JANUARY 2014 ON A FINAL BASIS"
Hugh W. Page  :  "5 yr Bunds now below zero. "