We were already defensive, to some extent, about the possibility that last Friday's gains were driven by month-end trading needs.  Indeed, there was a noticeable lack of buying demand right out of the gate today (both in the overnight and domestic sessions).  But then Microsoft gave bonds an even bigger reason to head toward higher yields--19.75 billion reasons, in fact.

Treasuries and MBS are not the only games in town when it comes to bonds/debt/loans/credit.  Of course there are auto loans, and you've probably heard of municipal debt as well.  But the biggest and most frequently noticeable of these other debt markets is that of corporate bonds.  

Simply put, corporate bond issuance affects mortgage rates by affecting the overall bond market supply situation.  When a corporation issues a ton of debt, it steals investors' attention (and money) away from Treasuries and MBS.  Lower buying demand in MBS means lower prices and higher rates.  (Here's the corporate bond primer if you haven't seen it already.)

Microsoft issued a ton of debt today.  It's not that markets didn't know this was coming--just that they didn't know exactly when or how much.  So there's always a little bit of shock value when it actually happens, and frequently a bit of 'supply indigestion' when it happens right out of the gate on Monday morning of NFP week.  

Weaker economic data made for a brief reprieve at 10am, but the afternoon was dominated by traders selling all manner of assets to get in on the Microsoft deal.  The bond weakness prompted more selling among opportunistic traders, thus making for a bit of "snowball selling" heading into the close.  10yr yields ended at an important technical pivot point of 1.52%.


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
103-26 : -0-09
Treasuries
10 YR
1.5200 : +0.0620
Pricing as of 8/1/16 7:01PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:43PM  :  ALERT ISSUED: Negative Reprice Risk Now Becoming Moderate
3:43PM  :  ALERT ISSUED: Negative Reprice Risk Considerations as Bonds Remain Under Pressure
9:47AM  :  Bonds Begin Day Down But Not Out

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
JOSEPH BUXTON  :  "Doc matrix here; http://www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf"
JOSEPH BUXTON  :  "For those that were asking if Freddie requires deduction for 2106; for commission you must deduct. Every other employee type they don't require per my convo with a Freddie support person in the past 2 weeks. This would include not deducting union dues which was my question when I contacted them"
Christopher Stevens  :  "All this corporate debt issuance post crisis and capital expenditures are still anemic. Stock buybacks, M&A's and LBO's are the financial beneficiaries du jour. Without capex I am not sure how future output and productivity will fair. Something we need for economic growth."
Jason Anker  :  "that could sting"
Victor Burek  :  "LAUNCH: MICROSOFT CORP $19.75B DEBT OFFERING IN 7 PARTS"