Please note the timestamp on the pricing snapshot below. Bond markets have sold off a fair amount since then, breaking through the 103-16 pivot in MBS, now down toe 103-12 and the 1.97 pivot in 10yr yields, now up to 1.9888. Things appear to be leveling off at these levels, but they're noticeably weaker from the initial rally that followed NFP this morning. It's unclear how much the ISM numbers actually justified the ensuing weakness, or if they merely pushed bond markets off a ledge of indecision. Either way, momentum shifted negatively and reprices for the worse have been streaming in.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:06 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Legitimate Post NFP Rally Threat? Support Holding For Now
Post ISM data, and possibly with a slight ear bent toward Bullard comments from around the same time, bond markets have given back some of the post-NFP rally. At the moment, this amounts to exactly HALF of today's gains in MBS, but we've been fighting off further weakness since 10:15am.
In terms of Fannie 3.0s, that puts the bounce in at 103-16 (super salient pivot point!) with current prices back up to 103-18. In terms of 10yr yields, the support has come in at 1.87 (SUPER salient pivot point!!!) with yields back down toe 1.96 now. The stock lever has been helpful.
Holding on the friendly side of these pivot points is very good, and if that's as weak as we get, it's a pretty acceptable and explainable amount of volatility in the context of a broader positive move following NFP. If we cross back over these pivots, however, things become a bit cloudier, and a bit less positive for the rest of the day. For now, it looks like the big volume and big support is already in place at the 1.97 pivot, and unless we cross back above, the takeaway from this morning continues to be positive.
ECON: Stronger-Than-Expected ISM Data Gives Rally Pause
- Headline PMI up to 53.1 vs 50.6 Consensus
- New Orders 53.3 vs 49.7 Previously
- Employment Index 54.0 vs 51.9 Previously
- Reaction: this has served as a counterpoint to the NFP rally, albeit a smaller one. MBS are 5 ticks off highs, still up 12 ticks on the day at 103-20
The PMI registered 53.1 percent, an increase of 2.9 percentage points from December's seasonally adjusted reading of 50.2 percent, indicating expansion in manufacturing for the second consecutive month. The New Orders Index registered 53.3 percent, an increase of 3.6 percent over December's seasonally adjusted reading of 49.7 percent, indicating growth in new orders. Manufacturing is starting out the year on a positive note, with all five of the PMI's component indexes — new orders, production, employment, supplier deliveries and inventories — registering above 50 percent in January.
Bond Markets Volatile And Mostly Stronger Following NFP
Treasuries traded in slightly weaker territory overnight but in a fairly narrow range. NFP anticipation had clearly kept bond markets disinterested in any big deviations from the post-FOMC path, save for a slow, incremental leak to marginally higher yields.
As many had surmised, bond markets seem to have been accounting for a more damaging number than the forecast when it came to NFP. Even with the positive past revisions, the 'as-expected' headline job creation has, thus far, paved the way for a fairly easy move toward better levels.
There has been a good amount of volatility in getting to where we are now, but considering the recent dynamics between tactical (shorter term, leveraged, "fast money") and strategic (longer time horizons, unleveraged, "real money") accounts, this volatility was not only to be expected, but has also played out in a fairly scripted manner. Those "fast money" accounts got into, out of, and back into the rally, all the while with underlying support from "real money."
The result has been the expected, "slippery surface" back towards 1.92 (10yr yields) that we expected on an average NFP print. Fannie 3.0's have easily broken 103-16 resistance and are currently up 14 ticks at 103-22.
All in all, this morning has been like opening a new can of tennis balls. Pop! Pressure being released. And they're green!
ECON: NFP Mostly As-Expected, U/E 0.1 Pct Higher, Big Revisions
- NFP 157k vs 160k Consensus
- Private Payrolls +166 vs +165 Consensus
- U/E 7.9 vs 7.8 Consensus
- Revisions: DEC from 155 to 196k, NOV from 151 to 247k
- Reaction has been choppy, mostly in the Green, but recently back toward unchanged (possibly revision digestion, or indigestion for bond markets). This leaves some room for the rest of the day's data to have an impact.
Total nonfarm payroll employment increased by 157,000 in January, and the unemployment
rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics
reported today. Retail trade, construction, health care, and wholesale trade added jobs
over the month.
Live Chat Featured Comments
Matthew Graham : "RTRS - FED'S BULLARD: FED COMMITTEE STILL NOT AGREED ON HOW BEST TO DESCRIBE ENDING BOND BUYING, SAYS IT WILL BE COLLECTIVE JUDGMENT ON WHEN THERE WILL BE SUBSTANTIAL IMPROVEMENT IN LABOR MARKET "
Matthew Graham : "that was out right around ISM as well. possible contributor "
Matthew Graham : "BN - BULLARD SAYS JOBLESS RATE IN `LOW 7'S' MAY LET FED END QE"
Jeff Anderson : "I said pull the plug up 16. No one listens."
Andrew Horowitz : "that is a major disconnect with most of the regionals"
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING NEW ORDERS INDEX 53.3 IN JAN VS 49.7 IN DEC "
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING ACTIVITY INDEX 53.1 IN JANUARY (CONSENSUS 50.6) VS 50.2 IN DECEMBER "
Gus Floropoulos : "im seeing a 25-35 bps imp. day over day"
Ira Selwin : "REPRICE: 9:49 AM - Wells Fargo Better"
Ira Selwin : "Now, we are, hence why Wells Fargo is having a price change as we speak."
Ira Selwin : "Which means pricing is figured out prior to then"
Ira Selwin : "Please remember that WF specificalyl releases rates at 930 east on the dot"
Dustin McAlister : "wow, wells pricing come out barely an .125% better than yesterday"
Matthew Graham : "RTRS- MARKIT U.S. MANUFACTURING SECTOR PMI AT HIGHEST SINCE APRIL ON FINAL BASIS "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI FOR JANUARY AT 55.8 VS FLASH READING 56.1 AND 54.0 IN DECEMBER "
Matthew Graham : "ISM more than sentiment, but would have to be fairly far from consensus to shift any momentum firmly in place by then."
Gus Floropoulos : "MG-how much weight does the balance of data coming have on the mkt?"
Gus Floropoulos : "yea, I think 1.93 is the resistance"
Matt Hodges : "i wanted 1.93"
Gus Floropoulos : "momentum appears to be more in our favor now"
Andy Pada : "I refer you to the 7:39 newstream post"
Gus Floropoulos : "just saying that with an uptic in the u/e rate, you would think we would be rallying further"
Christopher Stevens : "I would have liked a number that punched us in a face. We are now still stuck in this tight range and we all know at some point it has to make a major move."
Gus Floropoulos : "that revision was a big number"
Andy Pada : "I'm just glad we didn't get a number that punched us in the face"
Christopher Stevens : "not going anywhere because of the revisions upward"
Christopher Stevens : "DEC revision to 196l from 155k hurts a little"
Matthew Graham : "RTRS- U.S. LABOR DEPT SAYS FINAL ESTIMATE OF NONFARM PAYROLLS BENCHMARK REVISION RAISES MARCH 2012 LEVEL OF EMPLOYMENT BY 424,000 (0.3 PCT), OR 422,000 JOBS ON A SEASONALLY ADJUSTED BASIS "
Christopher Stevens : "still want to see that 10YR below 1.97 befoe I say we held off 2.0"
Matthew Graham : "RTRS- U.S. JAN AVERAGE WORKWK ALL PRIVATE WORKERS 34.4 HRS (CONS 34.5 HRS) VS DEC 34.4 HRS (PREV 34.5 HRS), FACTORY 40.6 VS 40.7, OVERTIME 3.3 VS 3.3 "
Matthew Graham : "RTRS - U.S. LABOR FORCE PARTICIPATION RATE 63.6 PCT IN JAN VS 63.6 PCT IN DEC "
Jeff Anderson : "Whoa. Traders were pretty defensive going in."
Matthew Graham : "RTRS - U.S. JAN JOBLESS RATE 7.9 PCT (CONSENSUS 7.8 PCT) VS DEC 7.8 PCT (PREV 7.8 PCT) "
Joe Ridings : "7.9 vs 7.8"
Tim Mitchell : "nice!!!!"
Matthew Graham : "RTRS- U.S. JAN GOVERNMENT JOBS -9,000 VS DEC -6,000 (PREV -13,000) "
Matthew Graham : "back to sleep"
Brayden Alexander : "UE should help us. "
Matthew Graham : "RTRS- US JAN PRIVATE SECTOR JOBS +166,000 (CONS +165,000), DEC +202,000 (PREV +168,000) "
Matthew Graham : "RTRS- U.S. JAN NONFARM PAYROLLS +157,000 (CONSENSUS +160,000) VS DEC +196,000 (PREV +155,000), NOV +247,000 (PREV +161,000) "