Data-Driven Rally, But There's Bigger Data Ahead

Yesterday's economic data made for a bit of back and forth in the bond market with Fed speakers ultimately riding to the rescue by forwarding the notion of "skipping" a rate hike at the upcoming meeting.  Today was a bit different with the AM econ data largely coming across in a bond-friendly manner.  This was especially true of Q1 unit labor costs which missed estimates by a wide margin.  Traders have increasingly moved on from debt ceiling headlines and are now turning their attention to Friday's jobs report as casting the tie-breaking vote on whether this week's events merit a return to the previous 3.4-3.6 range in 10yr yields. 

Econ Data / Events
    • Challenger Job Cuts
      • 80.1k vs 92k f'cast
    • ADP Employment
      • 278k vs 200k f'cast, 296k prev
    • Jobless Claims
      • 232k vs 235k f'cast, 229k prev
    • Q1 Labor Costs
      • 4.2 vs 6.3 f'cast, 3.3 prev
    • ISM Manufacturing
      • 46.9 vs 49.8 f'cast, 50.2 prev
    • ISM Prices Paid
      • 44.2 vs 52.0 f'cast, 53.2 prev
Market Movement Recap
08:27 AM

slightly weaker after am data.  10yr down half a bp at 3.65.  MBS down just over an eighth, but illiquid.

09:09 AM

Nice bounce back after 8:30am data.  MBS up nearly a quarter point and 10yr down 4.4bps at 3.601

02:49 PM

MBS at best levels with 5.0 coupons up 3/8ths.  10yr down 4bps at 3.605