An interesting thing happened today for those who were paying close enough attention to notice.  At face value the week's most important economic report came out weaker than expected and bonds rallied in response.  Notably, however, the rally actually began more than an hour and a half before the data.

What was going on at the time that could have motivated a clear departure from a very narrow, sideways grind at the week's highest 10yr yields?  Nothing more or less than the 8:20am CME open.  Every morning, the CME open is like the starting gate being thrown open at a race among bond traders to make certain trades that were simply waiting for the green light. 

Many times this is uneventful, but occasionally there are a few big trades that happen right at the open that end up setting a bit of a tone for the morning.  Other traders who may have been more neutral are thus persuaded to ride the coattails of the ensuing momentum. In other words, a few big traders take a leadership position by making big trades, and other traders follow the leader.

Rest assured, those "other traders" aren't always so willing to follow.  As such, we can indeed read something positive into their willingness to do so today.  In fact, it's not entirely clear that bonds even needed a weak ISM Non-Manufacturing reading in order to rally today, but it certainly helped reinforce the desire to remain in a sideways range with 10yr yields centered on 2.72%.


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
102-03 : +0-03
Treasuries
10 YR
2.7040 : -0.0200
Pricing as of 2/5/19 5:23PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:20AM  :  Weaker ISM Data Not Hurting

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - KAPLAN SAYS FED IS WORKING TOWARD A DECISION ON BALANCE SHEET IN COMING MONTHS"
Matthew Graham  :  "RTRS - FED'S KAPLAN SAYS IT'S HIGHLY APPROPRIATE TO BE OPEN TO ADJUSTING BALANCE SHEET PLAN"
Matthew Graham  :  "RTRS - FED'S KAPLAN SAYS HE EXPECTS FURTHER CLARITY IN FIRST HALF OF 2019"
Matthew Graham  :  "RTRS - FED SHOULD DO NOTHING ON RATES UNTIL THERE IS GREATER CLARITY ON ECONOMIC OUTLOOK, FINANCIAL CONDITIONS, KAPLAN SAYS"
Matthew Graham  :  "RTRS - FED'S KAPLAN, IN ESSAY, SAYS FED SHOULD BE PATIENT"

Economic Calendar
Time Event Period Actual Forecast Prior
Tuesday, Feb 05
10:00 ISM N-Mfg Bus Act * Jan 59.7 59.5 59.9
10:00 ISM N-Mfg PMI * Jan 56.7 57.2 57.6
Wednesday, Feb 06
7:00 MBA Purchase Index w/e 266.2
7:00 Mortgage Refinance Index w/e 1049.9
13:00 10-yr Note Auction (bl)* 27