The government shutdown happened overnight, but you might not know it judging by the state of financial markets this morning. In fact, you could probably double dog dare friends and family to "find the shutdown impact" in a chart of interest rate movements over the past few months. To do this, you'd want to make sure to hide the x-axis, just in case they've heard the news or were otherwise aware of the potential shutdown date. Then present them with a chart of rate movements and see if they can pick out the major events. Here's a cheat sheet for you with some key events highlighted on a chart of 10yr yields, including the few hours surrounding last night's shut down. Could you have identified it without the labels and dates?
All that political bluster... Full of sound and fury, signifying nothing.
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 11:07 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
Sites for Jobs Report, GDP, Not Being Updated During Shutdown
From the BEA (reports GDP)
"As a federal agency, the Bureau of Economic Analysis (BEA), like all other U.S.
government entities, is required to suspend its operations until Congress appropriates
funding for this fiscal year. This suspension will include the release of economic indicators
and other information that may be scheduled during the duration of the shutdown.
Additionally, the Bureau’s Web site will be inaccessible during the suspension.
When the agency receives funding to resume normal business operations, it will resume
production and release of its scheduled economic statistics. If the shutdown results in the
postponement of any indicators, a new release schedule will be issued as soon as possible."
Special notice from the BLS (key report: Employment Situation):
"This website is currently not being updated due to the suspension of Federal government services. The last update to the site was Monday, September 30. During the shutdown period BLS will not collect data, issue reports, or respond to public inquiries. Updates to the site will start again when the Federal government resumes operations. Revised schedules will be issued as they become available."
Shutdown Countdown Expires; Markets Still Standing; What Now?
Not that market participants were expecting any explosions when the shutdown countdown reached 00:00, but it wouldn't have been unreasonable to expect at least a modest reaction. Instead we're left with essentially nothing.
Volume and volatility were somewhat elevated overnight, but when we step back from these trading levels and look at them in the context of the past few weeks, they will be very hard to identify as having correlated to any significant event. It's sad in a way--that this is the visual representation of all the seemingly high drama.
Overnight markets saw limited movement for stocks and modest weakness for bonds. 10 yr yields never went higher than the overnight highs from Friday (2.67), and even look to have hit support at overnight levels from last Thursday (2.66). Bonds are weaker for sure but rally momentum has been dying down for several days. We may well have seen a similar pull back regardless of shutdown developments.
MBS opened up significantly weaker, but the first few ticks of the day should be ignored. Liquidity didn't come online until Fannie 3.5s were within striking distance of yesterday's range. They're now 5 ticks higher than the first real trades of the day at 101-23, though this is still 6 ticks weaker than yesterday's latest levels.
The Construction Spending report that had been scheduled for 10am is now indefinitely delayed due to the shutdown, but the ISM report remains on schedule.
Live Chat Featured Comments
John Rodgers : "From WF - According to their internal memo from this morning…they will continue to require tax transcripts on every file, even if it delays funding. This requirement will not be waived."
Matthew Graham : "RTRS- U.S. SENATE VOTES AS EXPECTED TO KILL HOUSE REPUBLICANS' REQUEST FOR FORMAL NEGOTIATIONS TO END GOVERNMENT SHUTDOWN AND MODIFY OBAMACARE REFORMS "
Matthew Graham : "RTRS - ISM REPORT ON U.S. MANUFACTURING SHOWS PMI AT 56.2 IN SEPTEMBER (CONSENSUS 55.0) VS 55.7 IN AUG "
Matthew Graham : "RTRS - OBAMA TO MAKE STATEMENT IN ROSE GARDEN AT 12:25 P.M. ET (1625 GMT) - WHITE HOUSE "
Jason York : "from what I've been told, you won't be able to get 4506-T's processed"
Dan Clifton : "so seriopusly, are 4506-ts being processed? or are those employees at IRS "non essential""
Matthew Graham : "yes, that's a bit unclear still AP."
Andy Pada : "Did I read somewhere in the newstream that Labor could release the September numbers if the Administration requests?"
Matthew Graham : "RTRS- MARKIT U.S. MANUFACTURING SECTOR FINAL PMI FOR SEPT AT 52.8 VS FLASH READING 52.8 AND 53.1 IN AUG"
Andrew Horowitz : "ADP will still report"
Victor Burek : "Bloomberg saying nfp report will be delayed if govt still shut down"
John Tassios : "This is computer model technical selling, the RSI and other indexes were to the point that some bond selling was due to happen to push yields up short term. I am thinking the 2.68 to 2.72 will be the upper range unless NFP comes in strong this week."
William Hansen : "I guess investors are looking for a quick hit expecting the gov will open up quickly "
William Hansen : "GM. Yesterday talk of a shut down Dow/S&P and Nasdq all close in the red. We shut down and futures are all in the green. "
Jeff Anderson : "GM, all. I can't figure out if I'm essential or non-essential today."
Ira Selwin : "By the way: The Labor Department has no plans to release the closely watched U.S. monthly jobs report on Friday in case of a partial government shutdown that lasts through the week."
Oliver Orlicki : "thought we would be the other way"
Oliver Orlicki : "2.65?"