Sideways Grind Means More Focus on Next Jobs Report

As bonds continue to distance themselves from last week's volatility, things are looking more and more sideways.  The 5yr auction was underwhelming, offering neither a rejection of post-Fed weakness nor a suggestion that it needs to continue.  While the week's remaining data could challenge recent range boundaries, the heavy lifting is more likely to be left for next week's jobs report.  MBS have one foot out the door having lost only 1 tick (0.03) on the day.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Markit Services PMI: 64.8 vs 70.0 f'cast, 70.4 prev

  • New Home Sales 769k vs 870k f'cast, 817k prev

Market Movement Recap
08:26 AM

Quiet, sideways overnight session despite strongest PMI since 2006 for the Eurozone.  MBS and Treasuries are starting out unchanged to slightly weaker.  Same story for S&P futures.

09:37 AM

modest weakness in the longer-end of the yield curve beginning exactly at 8:20am (CME open).  10s up just over 2bps, but MBS outperforming with 2.0 coupons down only 2 ticks (.06).

10:03 AM

a bit of friendly bounce now, following weaker econ data (both Markit PMIs and New Home Sales).  MBS back within a tick (0.03) of unchanged, and 10yr yields up only 1.1bps now at 1.477%

01:20 PM

Uneventful 5yr auction, but only after some weakness on the run up.  Shorter-dated Treasuries are faring worse, but losses are minimal overall.  10yr up 2.5 bps at 1.492.  UMBS 2.0 is hanging tough (right in line with previous update, down only 1 tick).