Fairly Balanced Day For Bonds and Fairly Balanced Outlook For Now

This morning's commentary discusses the two "teams" facing off for control of interest rate momentum: Team "Rising Rates" versus Team "Not So Fast."  Rising rates have been winning out since August (at least if you ask Treasury yields), but that may change if the economic recovery stalls.  Today's ISM numbers were weaker than forecast, but at 58.7 (anything over 50 = growth), not quite weak enough to convince bonds of an imminent stall.  Yields stayed sideways near unchanged levels.  The labor market data later in the week should be even more closely watched.  

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • ISM Manufacturing     58.7 vs 60.0 f'cast, 60.5 prev
    ISM Prices                  82.1 vs 77.0 f'cast, 77.6 prev

Market Movement Recap
08:23 AM

After opening at the lowest levels in weeks, stocks made steady gains overnight and bond yields were pulled very modestly higher amid a risk-on trade.  10yr Treasuries are +1bps at 1.08% currently and MBS are down 1-2 ticks (-0.03 to -0.06).

10:09 AM

No major reaction to the mixed ISM data (weaker headline PMI, but much higher prices).  10yr yields are up only a third of a bp now at 1.074% and UMBS are down 1 tick (.03) on the day with the 2.0 coupon trading at 103-08 (103.25).  

12:30 PM

Fairly light supply offered to the Fed during the 11:30am MBS buying operation.  MBS outperforming as a result.  Treasuries also rallied into positive territory, which only helped the MBS gains.  2.0 coupons now up 3 ticks (.09) on the day at 103-11 (103.34).

01:29 PM

Bonds rallied into the European close but ran out of steam after that.  Yields just trickled back up above 'unchanged' on the day, and MBS are now perfectly unchanged.  

03:33 PM

Back and forth in a narrow range... that's been the theme in Treasuries today.  They were slightly higher than unchanged 2 hours ago, and they're slightly lower now.  MBS haven't really moved during that time. Markets are waiting on more actionable info.  They're not sure what that info will be, but they'll know when they see it.