ADP provided a cruel gift on Wednesday. It isn't the most trusted advance indicator of the infinitely more important NFP data, but when it beats the forecast by more than 100k, markets can't help but adjust. And adjust they did! Wednesday was the epicenter of this week's bond market blast. All at once, traders got into position for NFP to surpass expectations.
Traders seem to have gone about half-way toward pricing-in ADP's implications for today's NFP numbers. At 235k vs a median forecast of 190k, NFP wasn't high enough to justify the level of defense. ADP thus helped us endure an NFP report that otherwise would have pushed rates a bit higher.
10yr yields fell from roughly 2.61 to 2.574 after the data and simply consolidated from there. Mid-morning headlines out of Europe helped reinforce the floor after a report from Bloomberg suggested the ECB (European Central Bank) was considering raising rates before its bond buying programs expire. The damage was minimal, temporary, and mostly an issue for Europe. US bond markets continued to trickle to the day's best levels by the close. Fannie 3.5 MBS gained roughly a quarter point.
NOTE: today's prices vs yesterday's prices won't convey a quarter point gain in MBS because today's prices are for April coupons (in Fannie/Freddie 30yr fixed) while yesterday's prices were for the now-retired March coupons (aka "the roll").
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