Bonds sold off again.  Don't look so surprised. 

Yes, ADP data was weaker than expected, but it didn't matter due to pervasively weaker momentum driven by the ongoing European bond market rout and a perpetually gluttonous buffet of corporate bond issuance.  If all that made sense to you, you probably don't need to read any more.  For those with furrowed brows, we'll dive a bit deeper.

As you're likely aware, core European debt (especially Germany's) has been in the throes of a brutal sell-off since late April.  10yr German Bunds rose 10bps today (which is a huge move in Bunds) from .51 to .61.  To bond optimists, this is nothing more than the first major growing pain associated with the QE process.  US bonds had the same sort of episodes when investors collectively 'freaked out' about the proverbial bottom being in for rates.  This is the biggest factor in play for US rates markets.

The second biggest factor is an ongoing glut of corporate bond issuance.  There were more huge deals today, bringing the total over $20bln for the second day in a row, and easily maintaining 2015's record pace.  As a reminder, corporate issuance hurts mortgage rates indirectly by acting as an alternative investment in some cases (decreases demand, and thus price for MBS/Treasuries).  Corporate issuance also frequently involves selling Treasuries short as a part of the rate-lock process (because corporate rates are based on Treasury yields).

The net effect was another ugly move for 10's, bringing them up to 2.25.  MBS stayed better insulated, as they've tend to do during big sell-offs.  Fannie 3.5s only lost 5 ticks to end at 104-00.  Fannie 3.0s (now much less relevant) were down 7 to 100-23.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
100-23 : -0-07
FNMA 3.5
104-00 : -0-05
FNMA 4.0
106-15 : -0-04
Treasuries
2 YR
0.6390 : +0.0120
10 YR
2.2520 : +0.0700
30 YR
3.0060 : +0.0980
Pricing as of 5/6/15 5:15PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:27PM  :  ALERT ISSUED: If You Haven't Seen A Reprice Yet, You Probably Will
11:00AM  :  ALERT ISSUED: Negative Reprices Slightly More Possible
10:28AM  :  ALERT ISSUED: Once Again, Early Reprice Risk Considerations / Heads-Up
8:53AM  :  Recovering From Weaker Overnight Levels After ADP

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Chris Robson  :  "Apple can't use their own cash hoard, because their tax avoidance schemes means it is all officially 'offshore'. Have to borrow instead."
Sung Kim  :  "http://mndne.ws/1Ehpzxf"
Sung Kim  :  "they just increased their stock buyback program, so that is why they are issuing so much debt"
Matt Hodges  :  "MG: i believe that is at least the third round of bonds issuance for Apple in the last month. unusual?"
Sung Kim  :  "this could very well get worse if more corporates get off the fence to front run rate increases"
Matthew Graham  :  "For those wondering why it's important: How Does Corporate Debt Issuance Affect Mortgage Rates? "
Matthew Graham  :  "FYI, "only" $20bln in new corporate issuance today. $10bln of that from Shell and $8bln from Apple"
John Tassios  :  "MG is correct, bunds moved down too quickly, they had to correct at some point. but at same time there is the massive ECB QE should take 10 yr Bund yields down again close to 0 and maybe even neg. There is not as much Bunds out there in market as there were TSY's when FED started the QE."
Matthew Graham  :  "Look... I don't say this to toot my own horn. In fact I say this to prove that any joe schmo could have observed the risks, but I pointed out the risks of at least a short term Bund correction before Gross tweeted it. Again, if I could see that possibility, you can bet smarter people saw it before me."
Sung Kim  :  "really, if Bill Gross had that much power, he wouldnt be ranked in the bottom 50% of money managers"
Corey ahlawat  :  "the german bund went from .05 to .5 in one week since 22nd "
Matthew Graham  :  "disagree. If Gross can see it, then it's old news to people that actually trade a lot of money"
Corey ahlawat  :  "Bill gross calling german bund short of a lifetime "
Corey ahlawat  :  "the bond market sell off started with "
David Rudnick  :  "MG, I choose to only soak in the stuff I want to hear. I hope you understand"
John Tassios  :  "I am nervous too short term with this selloff, even though I am still a long term positive on bonds. "
Matthew Graham  :  "you might want to go back and re-read that post. Yes, there will soon come a day when we hold steady or bounce, but what I said was it will be important to watch what happens at that time. If it turns out to be an isolated incident, that would be very bad, historically. "
David Rudnick  :  "this is ugly fast sell off... everyday is just more bleeding.... MG, I hope you are right about a bounce coming"