ISM's Non-Manufacturing Index has always been a relevant market mover, but especially so during in recent months. Today's rivals yesterday's ADP data as the biggest market mover of the week. Both pieces of data expressed similar reads on employment, and given that the BLS just announced we won't get NFP tomorrow even if the government reopens, those reads on employment are relatively more important than they otherwise might be.
Before the ISM data, bond markets entered the day in slightly weaker shape, but certainly not outside the recent range. Jobless Claims was relatively uneventful, though the rise in Continued Claims was notable--at least serving to balance the slightly lower-than-expected reading on Initial Claims for the week. MBS surged and Treasury yields plunged after the ISM data. Taken together with yesterday's ADP data, it paints a downbeat picture for the official payrolls figure that we not get for a while.
MBS Pricing Snapshot
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Pricing as of 11:08 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
ECON: ISM Non-Manufacturing Weaker Than Expected
- Non-Manufacturing Index 54.4 vs 57.4 Forecast
- Business Activity 55.1 vs 60.0 Forecast
- Employment Index 52.7 vs 57.0 previously
- Employment Index lowest since May
- Market Reaction: Bond markets rally at first, but holding near levels hit within seconds of the report. No negative bounce back, but no positive follow-through either.
"The majority of the respondents' comments continue to be positive; however, there is an increase in the degree of uncertainty regarding the future business climate and the direction of the economy."
Twelve industries reported increased business activity, and five industries reported decreased activity for the month of September. Comments from respondents include: "The turmoil and uncertainty of the current state of politics and the U.S. involvement overseas continues to drag on the economy" and "Seasonal growth/improved economic environment."
Employment activity in the non-manufacturing sector grew in September for the 14th consecutive month. ISM's Non-Manufacturing Employment Index registered 52.7 percent, which reflects a decrease of 4.3 percentage points when compared to the 57 percent registered in August. Nine industries reported increased employment, and seven industries reported decreased employment. Comments from respondents include: "Right-sizing the workforce" and "Hiring, but unable to fill all open positions."
First Move is HIGHER for MBS Following ISM Data
Fannie 3.5s into positive territory, up 2 tick at 101-27. 10yr yields down to 2.615. More to follow...
Short-Lived Strength After Jobless Claims; Liquidity Problems
Even now, 45 minutes after Jobless Claims, we've still seen less volume in Treasuries than we usually see by 8am on busy days. MBS have been even more plagued by illiquidity, with bid and ask quotes coming across infrequently and farther apart than normal. When we're watching a single line for price indications, this can make for some bumpy movements and we've seen this so far this morning. Most recently 3.5's ratcheted down a quick 3 ticks to 101-20 from 101-23, but they may ratchet back up just as abruptly.
10yr yields fell to 2.625 from 2.635 after the Jobless Claims data, but were unable to make it any lower since then. They're currently back up to 2.63 in very quiet trading.
Before that, the overnight session was similarly uneventful, though not without some movement. Bond markets generally weakened until 5:40am when 10's hit 2.65, and have generally strengthened since then. All told, none of the movement has violated yesterday's highs or lows--not even close. So we continue waiting for inspiration.
ECON: Jobless Claims Slightly Lower than Forecast, but Continued Claims Rise
- Initial Claims - 308k vs 313k forecast, 307k previously
- Continued Claims 2.925 mln vs 2.810 mln forecast
- Market Reaction: 10yr yields down 1bp and MBS largely unchanged but neither are trading briskly by any means.
In the week ending September 28, the advance figure for seasonally adjusted initial claims was 308,000, an increase of 1,000 from the previous week's revised figure of 307,000. The 4-week moving average was 305,000, a decrease of 3,750 from the previous week's revised average of 308,750.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending September 21, an increase of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 21 was 2,925,000, an increase of 104,000 from the preceding week's revised level of 2,821,000. The 4-week moving average was 2,837,250, a decrease of 4,750 from the preceding week's revised average of 2,842,000.
Live Chat Featured Comments
Matthew Graham : "RTRS- U.S. LABOR DEPARTMENT CONFIRMS MONTHLY JOBS REPORT WILL NOT BE ISSUED ON FRIDAY, SAYS AN ALTERNATIVE RELEASE DATE HAS NOT BE SET "
Matthew Graham : "looks like BLS heard us"
Victor Burek : "greater chance we don't get next months nfp then this months"
Andrew Horowitz : "the next question is if they are out during the gather week do we get a nfp report next month"
Ted Rood : "The policy on unpublished reports hasn't been published yet."
Victor Burek : "i think they will release a schedule for when the data would be released"
Matthew Graham : "I haven't seen a definitive statement on that eventuality "
Andy Pada : "if the the government were to open tomorrow, I'm assuming we would still not receive NFP, right?"
Matthew Graham : "RTRS - ISM NON-MANUFACTURING EMPLOYMENT INDEX 52.7 IN SEPT VS 57.0 IN AUG "
Matthew Graham : "RTRS- ISM REPORT ON U.S. NON-MANUFACTURING SECTOR SHOWS PMI 54.4 IN SEPT (CONSENSUS 57.4) VS 58.6 IN AUG "
Erik Grimmer : "Here in Chicagoland, Guaranteed Rate, The Federal Savings Bank and PNC all laid off ops people jn the last three days "
John Rodgers : "Cisco let another 5k go yesterday."
Victor Burek : "but I do agree with MG, we had some of a benefit from it, but I think most think the shut down will be short lived, pretty much a non event"
Matthew Graham : "I think we did see it to some extent (small), but it was a 'buy the rumor' sort of deal."
Christopher Stevens : "but maybe with the shutdown and debt ceiling battle looming treasury's are not where you go for 'quality'"
Christopher Stevens : "it is the lack of activity during this shut down I find interesting. I really thought we would see a small flight to quality."
Christopher Stevens : "so the smaller correspondents allowing closings w/out 4506 and as far as I know none of the top ten correspondent investors are. "
Matthew Graham : "RTRS- US CONTINUED CLAIMS ROSE TO 2.925 MLN (CONS. 2.810 MLN) SEPT 21 WEEK FROM 2.821 MLN PRIOR WEEK (PREV 2.823 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS ROSE TO 308,000 SEPT 28 WEEK (CONSENSUS 313,000) FROM 307,000 PRIOR WEEK (PREVIOUS 305,000) "
Steven M. Sims : "Our underwriting department is coming up with alternatives today - looks like copies of returns with a copy of a bank statement and or cancelled check showing the refund or tax payment matching the amount shown on the returns is where we are headed"
Christopher Stevens : "Correspondent that is. "Wells Fargo Funding will not make any changes to documentation requirements in the event that a shutdown occurs and will continue to require documentation including, but not limited to:
Tax Return Transcripts for all borrowers which must be included in the Loan file if income was used in the underwriting decision.""
Christopher Stevens : "Wells Correspondenet is NOT buying loans w/out 4506"