It's asking quite a lot to believe that the single most consistent source of guidance and inspiration for trading levels--economic data--is pretty much irrelevant at the moment, but it's true.  ADP Employment came out this morning at 8:15am.  In the past, any big reaction to ADP data begins PROMPTLY at 8:15:001.  We got nothing today.

8:20am, however, was a different story.  This told us oh so much about the nature of the rally right out of the gate this morning.  8:20 is the time of day where bond markets officially "switch on" for the day due to the participation of certain classes of traders that begin their day with the opening bell of the bond pit at the CME.  This doesn't mean that floor traders waving their arms behind Rick Santelli are making a huge difference for Treasuries, but the guys/gals at the desks at the CME that you don't see on camera are. 

These market participants were clearly lined up to buy bonds at 8:20am, and this kicked off the first positive snowball of the day.  It's a TRADEFLOW rally.  September was bad, and as we discussed right up to yesterday, the hand-off from one month/quarter to the next can see a decisive change or acceleration in momentum.  It's as if a large part of the trading community is/was chomping at the bit to take their October/Q4 positions.  Those could have either reinvigorated the September sell-off or firmly reinforced the late-September bounce back.  We got option 2.  Hurray.

By way of edifying the point, if there was any doubt that today is a day ruled by tradeflows, note the biggest move of the day in stocks also came at their opening bell.  While this isn't uncommon, it probably wouldn't have happened if stocks had much of an opinion about the economic data.  We would have seen futures move with bonds at 8:20 if the ADP news was really behind the move.  Bottom line, it was the opening bells for both stocks and bonds that inspired the biggest moves.  Incidentally, you can see the volume reaction to the 10am ISM data, and can also see it didn't result in much movement.

2014-10-1 lever2

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
99-07 : +0-17
FNMA 3.5
102-24 : +0-14
FNMA 4.0
105-25 : +0-11
Treasuries
2 YR
0.5200 : -0.0550
10 YR
2.4110 : -0.0840
30 YR
3.1260 : -0.0764
Pricing as of 10/1/14 12:34PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:45AM  :  Bond Markets in Rally Mode After ADP, But Not Necessarily Because of it
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "considering the unified move with stocks during this morning's rally, I'd say there's almost 0% chance this has anything to do with PIMCO. Stocks didn't participate on the PIMCO sell-off."
John Tassios  :  "I am thinking this is the PIMCO reallocation affect more than anything this morning."
Matthew Graham  :  "I know it doesn't feel like a safe thing to plan on, but at least don't be surprised when markets ignore it"
Matthew Graham  :  "I'd highly advocate forgetting about economic data"
John Tassios  :  "You think the PIMCO / Gross story delayed month end rally from previous quarter"
John Tassios  :  "MG, isn't this a bit unusual to have rally this early into next quarter? Usually month end / quarter end is when bonds rally. what are your thoughts on this?"
Matthew Graham  :  "RTRS - REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR SEPT WAS FOR INCREASE OF 210,000 JOBS"
Matthew Graham  :  "RTRS - ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 213,000 PRIVATE SECTOR JOBS IN SEPTEMBER"