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MBS RECAP: What To Make of The Post-NFP Rally
Jul 2 2021, 3:34PM

Nonfarm Payrolls (NFP) beat forecasts (850k vs 700k), which is normally something that would put upward pressure on rates.  While that seemed like a threat for the first 14 minutes, things calmed down nicely from there and bonds hit their early closing times with moderate gains intact.  Rather than try to force this outcome to fit some narrative (i.e. "this wasn't enough to derail the Fed's rate-friendly policies"), let's keep things simple.  The Fed has already been clear that NOTHING will be enough to derail those policies in the next month or three, so data like this merely helps shape the small scale trends inside a broader sideways range.  We should also take today's action with a grain of salt given the early close and 3.5-day weekend.  At least some of the movement could have been the simple result of position squaring as opposed to new trading ideas (i.e. traders packing things up for the weekend, not unleashing a bold new trading strategy in response to the jobs data).

Econ Data / Events
  • Fed MBS Buying 10am, 1130am, 1pm

  • Nonfarm Payrolls........ 850k vs 700k
    Unemployment Rate... 5.9 vs 5.7 f'cast
    Participation Rate........61.6 vs 61.6 prev
    Earnings...................... 0.3 vs 0.4 f'cast
    Workweek................... 34.7 hrs vs 34.9 f'cast

Market Movement Recap
08:39 AM

Volatile reaction in a relatively narrow range after NFP.  10yr popped just a bit higher, then rallied to best levels (1.427) before bouncing back up to 1.461 (and now back down to 1.45).  MBS did the same back-and-forth and are currently 2 ticks (0.06) higher on the day.  Looks like bonds are still deciding how they feel about this.

12:01 PM

Very uneventful after initial post-payrolls volatility.  10yr yields have settled down on their 1.44% pivot point and haven't moved more than a bp in the past 90 minutes.  2.0 UMBS are up 3 ticks (0.09) and have been similarly flat.

03:00 PM

At or near best levels for the early close.  2.0 coupons ended the day up 6 ticks (.19) at 101-06 (101.19).  And 10yr yields dropped nearly 3bps to 1.431.  Solid showing given the NFP headline, but surprisingly uneventful in terms of volatility.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.0
101-06 : +0-06
10 YR
1.4310 : -0.0490
Pricing as of 7/2/21 3:34PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
8:36AM  :  NFP Beats Forecast; Bonds Don't Mind

Economic Calendar
Time Event Period Actual Forecast Prior
Friday, Jul 02
8:30 Average earnings mm (%) Jun 0.3 0.4 0.5
8:30 Non-farm payrolls (k)* Jun 850 700 559
8:30 Average workweek hrs (hr)* Jun 34.7 34.9 34.9
8:30 Unemployment rate mm (%)* Jun 5.9 5.7 5.8
8:30 International trade mm $ (bl) May -71.2 -71.4 -68.9
10:00 Factory orders mm (%) May 1.7 1.6 -0.6

About the Author

Chief Operating Officer, Mortgage News Daily / MBS Live
A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

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