Uneventful Start to Q3, But Tomorrow is a Wild Card

There's always some risk that the first trading day of a new month can bring volatility and there's always some risk that bonds will take a "lead-off" on the Thursday before a jobs report.  But despite running both of those risks, today scraped by with minimal drama as of the 3pm CME close.  Bonds were just barely weaker--not nearly enough to read any significance into the move.  Tomorrow is anyone's guess.  NFP is certainly capable of producing volatility--as is the Friday before a 3 day weekend--but we'd have to question how sustainable any such move could be when we already know the Fed is waiting several more months before more heavily weighing the incoming economic data.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 364k vs 390k f'cast, 415k prev

  • Challenger Layoffs 20.476k vs 24.586k prev
    (Lowest in more than 20 years)

  • ISM Manufacturing 60.6 vs 61.0 f'cast
    Prices Paid 92.1 vs 86.5, highest ever

Market Movement Recap
08:48 AM

Bonds were just slightly weaker at 8am, but early domestic buyers had a stronger team than sellers, both before and after the 8:30am economic data.  10yr yields are now just a hair below 'unchanged' vs 5pm closing levels.  MBS are just a hair weaker.

10:05 AM

Bonds not balking at highest ISM Manufacturing "prices paid" on record.  Flat-to-weaker headline could be offsetting, or traders just might not care (they've preferred the "services" version of the report recently, for sure).  Yields at lows with 10's down 1.2bps at 1.456%.  MBS have recovered earlier weakness and are now unchanged to 1 tick (0.03) lower.

12:58 PM

Bonds reconsidered and ended up selling off modestly shortly after the last update, but have been holding steady right in line with overnight levels since then.  10yr yields are up only 1bp at 1.478 and 2.0 UMBS are unchanged.

03:01 PM

3pm CME Close is behind us and 10yr yields remain in the same ultra-flat range from the past 4 hour (still at 1.478).  MBS are down 2 ticks (0.06) currently in 2.0 coupons.  Stocks (S&P) are half a percent higher on the day, heading for another all-time high close.