Bond Markets Stay Strong Following Mixed 10am Econ Data
10am economic data included the Philly Fed index and NAHB's Housing Market Index. The latter isn't typically much of a mover, but it's also typically more upbeat than the rest of the housing metrics. The fact that it missed forecasts doesn't hurt.
The Philly Fed index was slightly stronger than expected at the headline level, but New Orders and the 6-month outlook were significantly weaker. On balance, the day of data now has no compelling counterpoint to last Friday's weak Payrolls number. As long as the door for economic tepidity remains open, bond markets can keep cautiously exploring this corrective range.
Philly Fed Index
- Headline index (business conditions) 9.4 vs 8.6 forecast
- New Orders 5.1 vs 12.9 previously
- Employment 10.0 vs 4.4 previously
- 6-month outlook 34.4 vs 44.8 previously, lowest since April
- Our take on share of market movement among 10am data: 8/10
- Full Release
NAHB Housing Market Index
- 56 vs 58 forecast
- Prospective Buyer index 40 vs 43 previously
- 6-month index 60 vs 62 previously
- Our take on share of market movement: 2/10
- Full Release
The reaction hasn't been extreme for bond markets, and it shouldn't be, considering the Philly headline was actually stronger. Fannie 4.0s have scratched out another few ticks of improvement to sit 8 ticks (.25) higher on the day at 103-28. That's only 3 ticks higher than 9:30am levels so we're not quite into positive reprice territory yet.
10's improved 1bp to 2.84, which was a total drop of just over 4bps on the day, but they bounced there and are back up to 2.847. Keep in mind that 2.84 has recently come into play as resistance. It's hard to see this on the charts, because 10's crossed below 2.84 on Monday, but the 2 bounces on either side of that (Mon and Tues morning) came during higher volume and more active trading. It's a roadblock that's worthy of consideration.