The world may never know if today's Trump tweets have anything at all to do with his stance on the Fed's fund rate, but one things for sure: they were single-handedly able to deliver another de facto rate cut.  I'll explain...

The Fed cut its rates by 25bps yesterday, as expected.  Some pundits were calling for a 50bp cut.  Trump wanted this and roasted the Fed for not delivering.  

Today, Trump tweeted about another 10% tariff on another $250 bln of Chinese goods.  Markets reacted in a major way with one of the main effects being a sharp drop in Fed Funds Rate expectations.  As such, until further notice and unless something pushes back in the other direction, financial markets are pricing in at least 12.5bps of additional rate cuts by the end of the year.

Before the Trump tweet, there were already some indications that potential bond buyers were willing to buy.  In fact, they'd made their presence known even before the weaker ISM Manufacturing data (this week's 2nd biggest report).  But the buying in the first few hours of the day was gradual.  The Trump tweets took things to another level.

Tomorrow brings the week's most important data in the form of NFP (the big jobs report).  Yes, it has the power to push back on today's gains, but no, it doesn't have the power to completely change the current narrative.  On the other hand, if it's much weaker than expected, watch out for a big blowout in bonds--one that moves so quickly to long-term low yields that it forces a fairly quick correction tomorrow mid-morning or afternoon.  Just a hypothetical of course.... Anything can happen on NFP Day!


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
101-14 : +0-18
Treasuries
10 YR
1.8930 : -0.1280
Pricing as of 8/1/19 4:06PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:31PM  :  Bonds Pop Big on New Tariff News
10:15AM  :  Bond Rally Continues as ISM Manufacturing Misses

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Hugh W. Page  :  "So I guess this would qualify as a snowball rally now."
Paul Martin  :  "We have a blow out employment report to reverse all of this......"
Matthew Graham  :  "Next 3 levels of historical significance are 1.88, 1.84 and 1.80. Pretty arbitrary though."
Brent Borcherding  :  "MG--1.8% the bottom?"
Edgar Winter Is Coming  :  "Next level of resistance? Might as well do a hat trick today."
Timothy Baron  :  "Rate renos, here we come!"
Matthew Graham  :  ""Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%...""
Timothy Baron  :  "Next leg lower, here we go."
Victor Burek  :  "he wanted 50bps.."
Paul Martin  :  "So Trump now controls the FED"
Matthew Graham  :  "[RTRS] - TRUMP SAYS WILL IMPOSE ADDITIONAL 10% TARIFF ON REMAINING $300 BLN OF CHINESE IMPORTS TO U.S. STARTING SEPT 1"
Matthew Graham  :  "c'mon twitter..."
Spencer Packer  :  "Yeah... what's going on?"
Matthew Graham  :  "something just popped."
Ray Leone  :  "Pricing does not appear to be dramatically better than yesterday. We'll see better when things settle down."
Matthew Graham  :  "RTRS - FEDERAL FUNDS FUTURES IMPLY TRADERS NOW SEE 68% CHANCE FED CUTTING INTEREST RATES IN SEPTEMBER VS 51% LATE ON WEDNESDAY - CME GROUP'S FEDWATCH"
Ted Rood  :  "NFP tomorrow, seems like it will take a very tepid report to not give some of today's gains back. That being said, zero reason to lock until end of day today"

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Aug 01
8:30 Jobless Claims (k) w/e 215 214 206
10:00 ISM Manufacturing PMI * Jul 51.2 52.0 51.7
10:00 ISM Mfg Prices Paid Jul 45.1 49.6 47.9
10:00 Construction spending (%) Jun -1.3 0.3 -0.8
Friday, Aug 02
8:30 Non-farm payrolls (k)* Jul 164 224
8:30 Unemployment rate mm (%)* Jul 3.7 3.7
10:00 Consumer Sentiment (ip) Jul 98.5 98.4
10:00 Consumer Inflation Expectations (1yr) (%) Jul 2.6
10:00 Consumer Inflation Expectations (5yr) (%) Jul 2.6
10:00 Factory orders mm (%) Jun 0.8 -0.7