The Wall St Journal ran a story this afternoon suggesting Treasury Secretary Mnuchin was pushing for a compromise deal to ease Tariffs on China in order to grease the skids for trade talks.  As a result, stocks and bonds lost their cool--relatively.  Case in point, in the 30 minutes following the headline, nearly 350k 10yr Treasury futures contracts traded.  To put that in perspective, the 30 minutes following the January 4th jobs report saw just over 250k.

To be fair to the jobs report, it created lasting volume throughout the day whereas the trade-related headlines made for a much more condensed dose.  Even so, the reaction speaks to importance of trade-related updates as the US works on hammering out a deal with China.  We could also argue that it speaks the deprivation that markets have been experiencing with respect to economic data and other actionable developments. 

In fact, this morning's economic data was notable for just that reason. Jobless Claims the the Philly Fed Index haven't been big market movers over the past few years.  Today, however, they prompted a noticeable reaction.  The easiest way to account for that is to say they represent a few of the reports that aren't affected by the shutdown.  

By the end of the day, bonds were only moderately weaker with 10yr yields up a few bps, holding near the important 2.75% level.  Fannie 4.0 MBS fared better by comparison, falling on 2/32nds (0.06) in price to 101-27 (101.84).


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
101-27 : -0-02
Treasuries
10 YR
2.7470 : +0.0180
Pricing as of 1/17/19 3:59PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:46PM  :  ALERT ISSUED: Bonds Jolt to Weakest Levels on Trade Headlines
9:41AM  :  ALERT ISSUED: Negative Reprice Risk Increasing For a Few Lenders
9:07AM  :  Modest Pressure After 8:30am Data; Bonds Unchanged

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "which is why we aren't much weaker, I'd imagine"
Ryan Ford  :  "weighs lifting tariffs is not the same as tariffs have been lifted"
Matthew Graham  :  "Volume is massive on this move--in line with January 4th NFP volumes"
Matthew Graham  :  "U.S. Weighs Lifting China Tariffs to Hasten Trade Deal, Calm Markets - Dow Jones News (more clear there)"
Bert Swyers  :  "ouch that's bad news for bonds I would assume"
Matthew Graham  :  "MNUCHIN SUGGESTS NEW GAMBIT TO BREAK STALEMATE--SOURCES"
Matthew Graham  :  "DJ U.S. WEIGHS LIFTING CHINA TRADE TARIFFS--SOURCES"

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Jan 17
8:30 Philly Fed Business Index * Jan 17.0 10.0 9.4
8:30 Jobless Claims (k) w/e 213 220 216
Friday, Jan 18
9:15 Capacity Utilization (%) Dec 78.5 78.5
9:15 Industrial Production (%) Dec 0.2 0.6
10:00 Consumer Sentiment Jan 97.0 98.3
10:00 1yr Inflation Outlook (%)* Jan 2.7
10:00 5yr Inflation Outlook (%)* Jan 2.5