That Escalated Quickly, But MBS Recovered Fairly Nicely

After weeks and weeks (6, to be specific) of extraordinarily calm and narrow trading ranges in ultra-low-yield territory, the bond market has suddenly decided it's time to jump back up toward higher yields. The move is fairly large, abrupt, and serious.  It was made all the more serious by the most terribly botched NFP forecast in history.  So are the good times over?

Econ Data / Events

  • 11:30-11:50 AM (ET) - Fed 30yr UMBS Buying  

  • Nonfarm Payrolls: +2.509m vs -8.000m forecast (biggest beat ever, by a wide margin)

  • Unemployment Rate: 13.3% vs 19.8% forecast, 14.7% previously

Market Movement Recap
08:16 AM

More pain overnight as the broad recovery mentality barrels ahead at full throttle.  Stocks surged.  Bonds utterly capitaluated (there was no contour or volatility in bond yields as they moved higher during Asian market hours).  Stocks pulled back in Europe and bonds caught their breath before moving to new highs for the day/week/month/quarter ahead of the jobs report.  MBS are down "only" 5 ticks (.16) and not complaining in light of the 13 tick loss for 10yr Treasury prices.

08:50 AM

Bonds utterly torched by the biggest NFP beat we've ever seen or likely will ever see.  10yr yields up 10bps.  MBS down half a point.  These losses seem modest in light of the data.  It is what it is.

09:18 AM

Catching our breath to some conciliatory extent now--MBS more so than Treasuries.  2.0 coupons down less than half a point now versus 3/4ths of a point earlier.  10yr yields still up almost 10bps and having a hard time getting below 9bps (0.919% currently).

12:50 PM

Little to report since the AM drama settled down.  Treasuries have continued to grind sideways between .92 and .93%.  UMBS 2.0s are a bit weaker than the were at last check, but also generally grinding sideways (down .31 on the day currently).  One supportive sign is that bonds haven't lost any additional ground beyond the initial spike even though the stock market made a case for that.

02:51 PM

MBS now at their best post-NFP levels, down an almost negligible eighth of a point on the day (sounds crazy to consider that next to the rate sheet damage).  10yr yields continue suggesting a sea-change for rate momentum though, still up more than 7bps at .902, but also well off their weaker levels heading into the 3pm CME close.