Bonds hit their best levels in nearly a year today, depending on the security in question.  MBS are lagging behind Treasuries for reasons discussed in the Day Ahead post (which you should save and refer to if you've been curious about MBS vs Treasury performance).

The face-melting rally wasn't destined to happen based on the overnight or early morning trading.  In fact, bonds were slightly weaker in the morning hours and didn't read much into stock losses between 9:30 and 9:55am.  Then the ISM report happened.

ISM Manufacturing is one of only a few top tier economic reports in terms of market movement potential and consistency.  Granted, it's no NFP--nothing is--but it's as close as any other report gets.  It completely tanked today, with the worst month-over-month loss since 2008.  That was the bond market's cue to keep the good times rolling.

Yields immediately turned positive, breaking the 2.62% technical floor in the process.  Rapid gains continued until yields hit 2.57%.  After hours of sideways movement, another mini-rally in the late afternoon was good for another few bps of improvement.  By 2pm, 10yr yields were 2.555%.  Fannie 4.0 MBS were nearly 3/8ths of a point higher.

Tomorrow brings the much-anticipated NFP data at 8:30am ET.  Bonds are at more and more risk of a big bounce back with each new day of gains, so it makes sense to have a defensive gameplan in place in the event things start going south.


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 4.0
102-14 : +0-12
Treasuries
10 YR
2.5520 : -0.1090
Pricing as of 1/3/19 5:07PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:09AM  :  BIG Miss in ISM Restores Bond Market Gains
8:25AM  :  Big Beat in ADP Adding Some Pressure on Bonds

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Hugh W. Page  :  "Be an interesting round table tomorrow with Powell, Yellen, and the Bernank talking for 2 hours tomorrow."
Sung Kim  :  "we have a new crowded trade for sure"
Sung Kim  :  "I suspect that the last 4 bps of of 10y gains is pure stops getting taken out"
Sung Kim  :  "apparently Apple is now the world even though their idiosyncratic risk was pretty apparent. mainstream business news is funny"
Matthew Graham  :  "could use fibonacci levels if you're into that sort of thing. Those would be 2.81 (broken), then 2.52, 2.29, and 2.06."
Matthew Graham  :  "we're into dartboard levels now. 2.62 was the floor until this morning. We can talk about old school levels like 2.47 I suppose, but none of them are perfect"
Broker Guy17  :  "What are our next resistance points?"
Matthew Graham  :  "the title of bond king is the most surefire sign of someone who is not a bond king. The moment people buy the snake oil or the moment the "guru" pretends like they can predict the future, run away from them quickly."

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Jan 03
7:00 MBA Purchase Index w/e 219.0 238.6
7:00 Mortgage Refinance Index w/e 729.9 832.2
8:15 ADP National Employment (k)* Dec 271.0 178 179
8:30 Jobless Claims (k) w/e 231 220 216
10:00 Construction spending (%)* Nov 0.2 -0.1
10:00 ISM Manufacturing PMI * Dec 54.1 57.9 59.3
10:00 ISM Mfg Prices Paid * Dec 54.9 58.0 60.7
Friday, Jan 04
8:30 Average earnings mm (%) Dec 0.3 0.2
8:30 Non-farm payrolls (k)* Dec 177 155
8:30 Unemployment rate mm (%)* Dec 3.7 3.7