Logical Reaction to Data Sets Stage For Interesting Week

The week began with bond markets reacting to weaker economic data with a logical rally.  That's the sort of quintessential connection that's been fairly elusive for most of the post-pandemic era. Last month's super strong jobs report (and subsequent bond losses) suggested that trend may be changing.  Today's initial confirmation adds to expectations for more of the same as the week continues.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • ISM Manufacturing 60.7 vs 65.0 f'cast, 64.7 prev
    Employment index 55.1 vs 65.1 f'cast, 59.6 prev

  • Construction Spending 0.2 vs 1.9 f'cast

Market Movement Recap
08:34 AM

A drop in covid cases and decent data in Europe pushed yields higher overnight.  Treasuries followed somewhat, but have bounced back a bit in the first few minutes.  10yr yields still up 1bp at 1.635 and 2.5 UMBS down 2 ticks (.06) at 103-23 (103.78).

11:33 AM

sharp gains after 10am econ data (more here) are reversing now.  10yr yields back up to 1.615 (-1bp on the day), and UMBS 2.5 coupons are back to unchanged after being more than an eighth of a point higher.

03:31 PM

previous weakness fizzed just before the noon hour and bonds opted to drift sideways in modestly stronger territory.  10yr yields just under 2bps lower and 2.5 UMBS 2 ticks (0.06) higher at 103-26 (103.81).