Today's key scheduled event was the release of the ISM Manufacturing PMI--one of the several most important reports after the perennial heavy hitter, NFP (aka, the jobs report, which also comes out this week).  The Manufacturing PMI has been stuck in a rut with the numbers indicating a contraction in the sector since last August.  They were forecast to continue that trend today, but instead, we got the first expansionary numbers since July 2019.

Given the bond market's willingness to react to last Friday's Chicago PMI (a sort of regional version of the national numbers represented in the ISM PMI), it was no surprise to see yields rise in response.  This hit an already weaker bond market and threatened to take yields back above Friday's highs (1.592% in 10yr yields).  

More of a surprise was what happened next.  10yr yields only moved as high as 1.575% before promptly returning to lower yields.  In just over an hour, all the damage was undone and in the next hour, bonds continued to improve--ultimately ending the day near the lows seen during the overnight session (1.525%). 

Late day European bond market strength, a reversal in the stock market, and plain old "buy the dip" mentality in Treasuries underpinned the move.  Some would suggest a trade-related headline was also a culprit, but correlation is more defensible than causality given the timing of the news and the related volume of trade.  An easier case can be made for the next wave of bond-buying (heaviest around 11:30am ET) when a CDC headline confirmed 11 coronavirus cases in the US. 

Bonds will continue juggling coronavirus news against the economic picture as the week continues, but tomorrow is light on data.


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
102-05 : -0-03
Treasuries
10 YR
1.5250 : +0.0060
Pricing as of 2/3/20 6:27PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:30AM  :  Post-PMI Weakness Erased
10:05AM  :  ALERT ISSUED: Bonds Losing More Ground After ISM Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Michael Pennington  :  "Yep I locked my VA 30yr today 2.75% not going to get any better than that IMHO"
Brian McFarlane  :  "No reason to wait as far as I am concerned...at the end of the day how much real estate is beneath us rate wise?"
Blake Carrillo  :  "Curious, who is refinancing their own homes now, vs waiting things out?"

Economic Calendar
Time Event Period Actual Forecast Prior
Monday, Feb 03
10:00 ISM Manufacturing PMI * Jan 50.9 48.5 47.2
10:00 ISM Mfg Prices Paid Jan 53.3 50.8 51.7
10:00 Construction spending (%) Dec -0.2 0.5 0.6
Tuesday, Feb 04
9:45 ISM-New York index Jan 869.0
10:00 Factory orders mm (%) Dec 1.2 -0.7