Bond Markets hit Weakest Levels After Stronger Data
Both of the 10am economic reports came in stronger than expected, and bond markets have weakened as a result. Fannie 3.5s are at the lows of the day, down 4 ticks at 102-06. 10yr Treasury yields are up 1.8bps at 2.509.
Prices haven't moved low enough to suggest negative reprice risk yet, but that could be the case if we lose a few more ticks. Here's a run-down of the data
ISM Non-Manufacturing
- ISM PMI 58.7 vs 56.3, highest since December 2005
- Business Activity 62.4 vs 58.1, highest since Feb 2011
- New Orders 64.9 vs 61.2 previously, highest since August 2005
Factory Orders
- June Orders +1.1 vs +0.6 forecast
- June Durable Orders revised to +1.7 from +0.7
Given the strength of those reports, bonds are actually holding their ground remarkably well. As we discussed in this morning's 'day ahead,' part of the reason may be that these reports are falling AFTER the NFP/GDP readings. In addition, it could just be taking time for the full effects to be felt in slower, summertime trading.