MBS Outperformance is Part of the Answer to Today's Riddle

When does an obviously weak jobs report result in bonds losing ground?  We already know the answer (spoiler alert: it's "today"), but the reasons behind the answer are up for debate to some extent.  The focus of the morning's commentary was to lay most of those reasons out with charts, but as the day progressed, MBS outperformance helped emphasize one of the factors even more.  We discuss that in addition to all the other charts in today's video.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Nonfarm Payrolls 235k vs 728k f'cast, 1.053m prev

  • Unemployment Rate 5.2 vs 5.2 f'cast, 5.4 prev

Market Movement Recap
08:37 AM

Slightly weaker overnight, then a paradoxical reaction to the weak jobs data.  Bonds tried to rally for a minute or two, but are now at the weakest levels of the day, up 3.1bps at 1.316% in the 10yr, and MBS down an eighth of a point.

11:45 AM

Bonds have stopped the bleeding after the initial sell-off.  MBS still down about an eighth.  10yr yields sideways about 4bps higher (1.324%) after being 5+ bps higher (1.336%) at the weakest levels 

04:24 PM

It's telling that we only have 3 bullet points in this section on a jobs report Friday.  It speaks to the fact that everything happened in less than 30 minutes this morning, and nothing has really happened since then (unless you want to count modest MBS outperformance, which is "nice" for sure).  10yr yield = 1.324% still.  MBS now down only 3 ticks (0.09).