Bonds were stronger overnight, riding a wave of buying demand on the heels of yesterday's weak econ data and US/China trade deal uncertainty.  Some market participants were said to be looking for a looking for an NFP number that was even lower than the already low forecast of 89k.  While that didn't make much sense to me personally (in fact, I felt forecasts were overestimating the impact of the UAW strike), I'll never turn down a good bond rally.

NFP ended up doing what we feared it might by coming in at 128k vs the 89k forecast.  Internals were decent enough and bonds were suddenly tasked with the need to make a quick correction toward higher yields.  The correction lasted all of 8 minutes before yields began drifting back toward the pre-NFP lows.

By the time the 10am ISM Manufacturing data came out, bonds had erased most of the losses.  But ISM ended up coming in at levels that were NOT weak enough to keep the rally fires burning.  At 48.3, it may have fallen short of the 48.9 consensus, but it represented an improvement from the 47.3 previous reading.  Bonds took this as a reason to keep selling.  Stocks kept rallying.  Was this the end of this week's good times?  

Ultimately, yields found a ceiling after a perfectly acceptable amount of weakness before rallying again into the close.  At the end of the day,  10yr Treasuries were only up 2.7bps.  Fannie 3.0 MBS--better insulated from this Treasury volatility--were pretty close to unchanged.  Next week brings a Treasury auction cycle (which could explain some of the predisposition for bonds to sell-off this afternoon due to the implications of additional supply) as well as the NON-Manufacturing version of today's ISM Purchasing Managers Index.


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
101-19 : -0-01
Treasuries
10 YR
1.7140 : +0.0230
Pricing as of 11/1/19 5:23PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:47PM  :  ALERT ISSUED: Negative Reprice Risk Considerations
10:36AM  :  Not Much Love From Weaker ISM Data
8:36AM  :  ALERT ISSUED: Bonds Weakening Quickly After Strong NFP

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Glenn Cameron  :  "This little move down has really helped."
Timothy Baron  :  "Nice little NFP Friday."
Matthew Graham  :  "correct AM. I speak to that in the forthcoming huddle. Just recorded the audio and now encoding video, so should be pretty quick"
aaron meyer  :  "It would appear the apparent trade agreement today isn't hurting us negatively, correct?"
Timothy Baron  :  "Yep, 5 day 3.0 chart looks strong."
Matthew Graham  :  "Notably, the chart suggests this was a big enough deal to reverse the post-NFP recovery. I think markets were getting over NFP fairly well actually, then ISM didn't confirm the Chi-PMI panic, so we moved back to yesterday morning's high yields. All in all though, retaining most of the week's gains. Not a bad week at all."
Matt Hodges  :  "seems the market already priced in the china deal - at least phase 1 already in the books."
Mike Christensen  :  "That news can't help bonds.............."
Matthew Graham  :  "- U.S., CHINA REACHED CONSENSUS ON PRINCIPLES AFTER TALKS BETWEEN MAIN TRADE NEGOTIATORS -XINHUA"
Matthew Graham  :  "U.S. SAYS LIGHTHIZER, MNUCHIN "MADE PROGRESS IN A VARIETY OF AREAS AND ARE IN THE PROCESS OF RESOLVING OUTSTANDING ISSUES" IN CHINA TRADE TALKS - CNBC"
Matthew Graham  :  "CHINA SAYS ACHIEVED CONSENSUS IN PRINCIPLE WITH U.S. IN CALL"
Jude Bridwell  :  "Shouldn't take much longer to see some reprices for the worse"

Economic Calendar
Time Event Period Actual Forecast Prior
Friday, Nov 01
8:30 Non-farm payrolls (k)* Oct +128 89 136
8:30 Unemployment rate mm (%)* Oct 3.6 3.6 3.5
10:00 ISM Manufacturing PMI * Oct 48.3 48.9 47.8