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

By: Matthew Graham

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.


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
101-20 : -0-06
FNMA 3.5
104-22 : -0-05
FNMA 4.0
106-25 : -0-04
Treasuries
2 YR
0.5990 : +0.0360
10 YR
2.0830 : +0.0370
30 YR
2.7870 : +0.0280
Pricing as of 4/30/15 12:36PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:02AM  :  ALERT ISSUED: Modest Negative Reprice Risk, Depending on the Lender
9:16AM  :  Drop That Bag of Treasuries! (or Bunds, or MBS, or....)

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "If anyone had/has any doubts about Bunds being in the driver's seat for this sell-off. http://mbspric.es/1KxcLIk"
John Tassios  :  "I agree with MG, this week's selloff is all about the bund correction. 10 yr Bund made a big run in 2015, so selling now for profit when you have a big buyer called ECB waiting to buy is normal correction in bunds. When you see Gross and Gundluch & co, all lining saying to short, that means bund ready to top out in yields and rally again. Just my opinion only."
Victor Burek  :  "but with no wage growth, pretty obvious that the wrong type of jobs are being created"
Victor Burek  :  "job numbers have been fantastic for over a year...claims and nfp"
Jason Anker  :  "Evidence points to an improving job market, has for some time. "
Bill Hills  :  "thoughts on this morning's claims number? crap indicator of anything? Or a meaningful development? Will we see a timid market until NFP next Friday?"
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MANAGEMENT INDEX 52.3 IN APRIL (CONSENSUS 50.0) VS 46.3 IN MARCH"
Victor Burek  :  "I guess investors think todays data good enough to keep fed on path or hiking"
Matthew Graham  :  "RTRS- US MARCH CORE PCE PRICE INDEX +0.1 PCT (+0.1477; CONS. +0.2 PCT) VS FEB +0.1 PCT (PREV +0.1 PCT)"
Matthew Graham  :  "RTRS- US MARCH PERSONAL INCOME UNCHANGED (CONS +0.2 PCT) VS FEB +0.4 PCT (PREV +0.4 PCT)"
Matthew Graham  :  "RTRS- US MARCH PERSONAL SPENDING +0.4 PCT (CONSENSUS +0.5 PCT) VS FEB +0.2 PCT (PREV +0.1 PCT)"
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS FELL TO 2.253 MLN (CONS. 2.300 MLN) APRIL 18 WEEK FROM 2.327 MLN PRIOR WEEK (PREV 2.325 MLN)"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 262,000 APRIL 25 WEEK (CONSENSUS 290,000) FROM 296,000 PRIOR WEEK (PREVIOUS 295,000)"