MBS MID-DAY: Europe Still Pushing Bond Weakness, but Domestic Data Isn't Helping

During yesterday's bond market rout, a lousy reading on domestic data (GDP) effectively did nothing to stem the tide of overnight weakness.  Today, the opposite is mostly true.  Although bond markets in Europe were weaker overnight, domestic bonds managed to open in flat-to-slightly-positive territory.  Economic data was generally stronger this time around, and that was where domestic bond markets found their motivation for the day.

10yr yields are up another 4.4bps to 2.09 and had been as high as 2.11 earlier today.  MBS are faring better by comparison with Fannie 3.0s down 7/32nds.  This actually leaves them in line with yesterday's weaker, supportive levels, making for minimal changes in rate sheets.

As for the data, the biggest beat of the morning was Jobless Claims coming in at 262k vs 290k forecast.  Jobless Claims isn't the biggest market mover these days, but when the gap is that big, markets react, or at least it looked like that's what they were doing.  It's far more likely that the reaction was to the Employment Cost Index which showed increased wage growth--a hot topic these days, and far more interesting than the stuff we already know about a high number of jobs in the economy.  Reuters has an excellent write up.

Support looks to be in for the day (ceilings over Treasury yields and floors under MBS prices), and with Europe winding down (negative pressure) and month-end buying ongoing (positive pressure), hopefully it will continue to hold.