Bond Markets Unchanged to Marginally Weaker After First Round of Data
Bond markets began the overnight session holding steady. Weaker-than-expected manufacturing data out of China made for a noticeable jolt lower in Treasury yields and stock futures. Narrow, sideways trading resumed about 8 minutes later and persisted until the European session brought yields back in the other direction, ultimately walking in the door near unchanged levels, but trending higher/weaker from 7:30am.
MBS opened in line with yesterday's latest levels and were essentially unchanged ahead of the first round of economic data, comprised by Jobless Claims and Consumer Prices (CPI). CPI was in line with expectations and isn't much of a market mover these days anyway.
Claims, on the other hand, cover the "survey week" this week for NFP (because today's Jobless Claims data is based on last week's filings and the all-important Nonfarm Payrolls establishment survey asks businesses how many employees received compensation during the pay period that includes the 12th of the month). There's nothing too magical about that, but markets tend to may a bit more attention to the 'survey week' instance of Jobless Claims.
This time around, there isn't much of a reaction, perhaps because the data was so close to consensus. Here's a run down:
Initial Jobless Claims
- 336k vs 335k forecast, 339k previously (unrevised)
- Continued Claims 2.981 mln vs 2.970 mln forecast
- Share of market movement among 8:30am data: 9/10. Granted, there's really not much market movement at all, so this is just as easily "N/A."
Consumer Price Index
- CPI +0.1 vs +0.1 forecast
- Core CPI (excludes food/energy) +0.1 vs +0.1 forecast
- Year over year +1.6 vs +1.6 forecast, both for headline and 'core'
- Share of market movement among 8:30am data: 1/10
If anything, bond markets were slightly weaker in the immediate wake of the data, but have since stabilized. Fannie 4.0s are unchanged on the day and 10yr yields are only 0.0016 higher. The 8:30am data defers to 10am Philly Fed data. As noted in the 'Day Ahead,' it's not yet clear if the weather issues will continue to prevent logical trading reactions to the data, but Philly Fed is our best bet to see old-fashioned cause and effect this morning.