The big news so far today has been the much-weaker-than-expected ISM Manufacturing data. While the headline "Purchasing Manager's Index" was still in expansionary territory at 51.3 (anything over 50 connotes expansion), this was far lower than the 56.0 forecast. It was also the biggest month-over-month drop since 1980.
While the report made some mention of recently cold weather constraining activity, that didn't stop markets from reacting forcefully. Stocks were more or less demolished, with S&Ps down more than 20 points already. 10yr yields had a pretty steep drop as well, moving from 2.67 before the data to 2.61 a few minutes later.
MBS aren't able to keep up quite that pace when it comes to these big, reactionary, risk-off movements. But the swing from negative to positive territory still brings them to their best levels since mid November. Compared to the 17/32nds gain in 10yr Treasury prices, Fannie 4.0s are up only 7/32nds and 3.5s are up 10/32nds.
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