At first glance--and especially if we focus only on domestic hours--today's trading session is looking a lot like yesterday's in that we moved rather abruptly weaker in the morning and have drifted relatively sideways since then. The key difference from yesterday's session is that today's morning jolt was more to do with the overnight market movements than the 8:30am data. Even though today's Jobless Claims figures were much stronger than expected, bond markets did an excellent job of taking that in stride. Indeed, Treasuries are already back in line with pre-data levels while MBS are fairly close. That doesn't mean there's not weakness, simply that we were already in worse shape before the data hit. It is a net positive, however, to be holding ground in spite of that stronger data and in spite of the impending 30yr Bond Auction at 1pm.
MBS Pricing Snapshot
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Pricing as of 11:09 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
3 Employment Reports, 3 Directions, Bond Markets Weaker
The title is somewhat misleading as it suggests that three pieces of employment-related economic data underly the three big shifts in bond market momentum this morning. Indeed, some might argue this to be the case, and it certainly is the case in Australia where employment rose to 71.5k vs a 9k consensus. As others have pointed out, if US NFP beat recent averages that much, it would equate to over a million jobs created.
As such, there's a very loud and silly bandwagon out there suggesting this as a source of overnight weakness. While it did make for a huge move higher in Australian debt yields, the reaction in Treasuries was less than 1bp, AND US 10's stayed in that same 1bp range right through to the EU open. This marked the scene of the real move higher in yields, taking US Treasuries just slightly higher than yesterday's highest pre-auction levels.
As per usual, German Bunds were the most closely-related guidance giver overnight, but the connection has been increasingly choppy (within reason). Whereas Bunds managed to ratchet appreciably lower after EU Employment data, Treasuries didn't follow to the same extent, likely thinking about impending Jobless Claims and the afternoon auction supply.
US 10's were already playing defense before Claims, with the stronger-than-expected result taking yields to their highest levels since NFP Friday. We've seen a great show of support so far with 10's stopping short of challenging the most important 2.075 technical ceiling but we're still in significantly weaker territory.
10yr yields are currently up almost 4bps at 2.0594. MBS opened up in line with yesterday's lows and have given up a few more ticks since then, currently down 8/32nds at 102-06. S&P futures are just off their post-Claims highs, but still 3pt higher vs yesterday's 4pm levels. The next major consideration is the 1pm 30yr Bond Auction, as well as the stock lever after the 9:30am opening bell.
ECON: Jobless Claims Beat Consensus Handily
- Claims 332k vs 350k Consensus, 342k Previously
- 4 week average and continued claims lowest since mid 2008
In the week ending March 9, the advance figure for seasonally adjusted initial claims was 332,000, a decrease of 10,000 from the previous week's revised figure of 342,000. The 4-week moving average was 346,750, a decrease of 2,750 from the previous week's revised average of 349,500.
The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending March 2, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending March 2 was 3,024,000, a decrease of 89,000 from the preceding week's revised level of 3,113,000. The 4-week moving average was 3,098,250, a decrease of 28,250 from the preceding week's revised average of 3,126,500.
Live Chat Featured Comments
Jeff Anderson : "The Rickster was just talking about that spread. What's the takeaway from the bunds staying so low versus us rising in rate?"
Matthew Graham : "ha, yeah. All that tough talk sorta gave way to true colors in 2012 I guess. Markets adjusted their appraisal of German rhetoric to favor barking > biting from then on it seems."
rlafave : "MG - of course Germany better be confident with all the money they have tied up in Italy and Greece"
Matthew Graham : "(BTP = italian bonds, btw... "Wider spreads" indicates a widening gap between BTPs and similar maturity benchmark debt, in this case German Bunds)"
Matthew Graham : "in fact, BTP spreads are WIDER since he said that--just goes to show you how much stock traders put in Schaeuble, Rehn, et. al. pontificating."
Victor Burek : "yeah, right"
Matthew Graham : "RTRS- GERMAN FINMIN SCHAEUBLE SAYS GERMAN FINANCE MINISTER SCHAEUBLE SAYS VERY CONFIDENT ITALY WILL BUILD GOVT CAPABLE OF ACTING"
Oliver S. Orlicki : "Blackrock is going to be the largest property manager in the country soon. They are buying houses in Florida by the hundreds"
Brent Borcherding : "They will be made available in Oregon starting August/September. We changed to a judicial foreclosure state 12 months ago and it shut off the foreclosures, 12 months to foreclose and then homeowner can buy back for 6 months after that...so banks have to wait 18 months to list. All it did was delay the inventory here. We're in for a shock in Oregon at the end of this year."
Victor Burek : "Blackrock just increased their line of credit to buy more homes"
Oliver S. Orlicki : "Inventory is low across the country because banks are not releasing the huge pipeline of shadow inventory"
Victor Burek : "whatever happened to the millions of homes in shadow inventory...dont hear anything about them any longer"
Jeff Anderson : "The challenge here is limited inventory to sell. It seems the majority of my buyers keep getting out bid as there isn't much to look at. Anyone else hearing abut the low inventory from their realtors?"
Christopher Stevens : "we are forecasting a conservative 20% increase in our purchase business for 2013. The purchase locks I have seen already this qrtr are positive signs for us."
Matthew Graham : "pretty impressive to be bouncing where we're bouncing. That may be the most positive development all week, especially considering this is the survey week for April NFP."
Mike Drews : "I suggest everybody adjust their business plans to purchase loans and start rooting for positive economic data"
Matthew Graham : "RTRS- US Q4 CURRENT ACCOUNT DEFICIT $110.4 BLN (CONSENSUS $112.8 BLN), Q3 DEFICIT $112.4 BLN (PREV $107.5 BLN) "
Matthew Graham : "RTRS- U.S. FEB PPI EXFOOD/ENERGY +0.2 PCT (CONS +0.2 PCT) VS JAN +0.2 PCT "
Matthew Graham : "Other data out at 8:30 of little to no consequence, especially given nearness to consensus, FWIW"
Brent Borcherding : "Setting up good for the auction"
Matthew Graham : "RTRS - US CONTINUED CLAIMS FELL TO 3.024 MLN MARCH 2 WEEK, LOWEST SINCE JUNE 2008, (CONS. 3.100 MLN) FROM 3.113 MLN PRIOR WEEK (PREV 3.094 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 346,750 MARCH 9 WEEK, LOWEST SINCE MARCH 2008, FROM 349,500 PRIOR WEEK (PREVIOUS 348,750) "
John Tassios : "Also selling in front of 30 year auction today / hopefully after the 1:00 auction bonds will trun good again"
Christopher Stevens : "it seems the market is certainly planning on a strong number. PPI will also be interesting. Any hint of inflation would certainly not be a good thing."
Oliver S. Orlicki : "better hope for a crappy claims # or off to the races"