Negative Momentum Remains Threatening Ahead of Jobs Report

We came into today hoping (but not necessarily expecting) to see bond traders eagerly snap up inventory at these new, lower prices (aka higher yields), but alas!  More selling was in store.  Traders woke up early to push 10yr yields to another long-term high.  Most of the weakness was intact by 9:30am and the rest of the day was mostly sideways for Treasuries.  MBS had another bout of selling following the Fed's 10am-1020am buying operation, but even after that additional weakness, MBS outperformed on the day.  While tomorrow's jobs report may not be the trading motivation markets are looking for, NFP day nonetheless serves as a central meeting point for a new month of trading idea in the bond market.  In other words, while the jobs data may not spark a huge move in and of itself, huge moves are nonetheless possible--for better or worse.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Jobless Claims 787k vs 800k f'cast, 790k prev

  • ISM Non-Manufacturing 57.2 vs 54.6 f'cast, 55.9 prev

Market Movement Recap
08:40 AM

Moderately weaker overnight as congress worked late to certify the presidential election results.  10yr yields were as high as 1.066 but recovered modestly during European hours (currently 1.059).  MBS are opening down 3 ticks (.09) at 100-15 (100.47)--still inside yesterday's trading range.  No reaction to Jobless Claims data.

10:54 AM

Sharper weakness in MBS vs Treasuries after the Fed's 10-1020am buying operation, but broad bond market weakness overall.  Stocks are soaring with S&P futures up more than 1.5%.  This is a broad rotation out of bonds and into stocks in response to the prospects of increased stimulus.  Stronger econ data isn't hurting.

03:47 PM

Little-changed since topping out in yield (or bottoming out in prices).  Today has basically consisted of a broad-based risk-on move for domestic traders in the AM and then _______ (fill in the blank with whatever traders have been doing since the AM hours, because it hasn't consisted of trading).