It looks like the nail is in the coffin for the pre-NFP rally potential.  There was some small chance today (emphasis on 'small') that economic data could have been weak enough to avoid arguing against last week's weaker economic themes.  Had that happened, we might have seen bonds markets doing a much better job of holding recent gains, or even erasing some of yesterday's weakness.

But it's not happening.

The first clue came after this morning's weaker ADP data.  Payrolls came in at 185k vs 215k forecast and a downwardly revised 229k from last month.  Certainly, that's weaker than expected, but markets didn't think it was weak enough to support last week's gloomy mood.  There was a brief rally, but it quickly changed course and gave way to additional moderate losses in the morning hours.

No matter!  We still had ISM Non-Manufacturing coming up and perhaps IT would be weak enough to paint the necessary picture for better bond market stability.

No dice.

ISM came in at a balmy 60.3 compared to a median forecast of 56.2.  Moreover, the employment and inflation components were stronger as well (unlike Monday's sister report).  Bonds did not like this one little bit, and green light for the pre-NFP correction shone brighter.  10yr yields jumped up to 2.293 at their highest levels and Fannie 3.5s were as low as 103-02, more than 3/8ths of a point lower on the day.  Some lenders have already repriced for the worse.


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
99-29 : -0-12
FNMA 3.5
103-06 : -0-09
FNMA 4.0
105-29 : -0-07
Treasuries
2 YR
0.7400 : +0.0040
10 YR
2.2810 : +0.0580
30 YR
2.9570 : +0.0590
Pricing as of 8/5/15 11:40AMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:05AM  :  ALERT ISSUED: ISM Much Stronger; Bonds Not Happy; Reprice Risk Can't Be Ruled Out
9:44AM  :  ALERT ISSUED: Losing Ground Despite ADP Miss

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "late July's intraday high was 2.322. Any higher than that would be disconcerting in terms of a pre-NFP correction, but even then, I don't really think we'll see any technical level that matters today. Definite pivot point at 2.28 on the longer term chart. But there again, it's not such a hard and fast line that we couldn't close slightly higher and still technically be holding support in the bigger picture."
Victor Burek  :  "or with nfp on deck, does it matter"
Victor Burek  :  "what level we hoping to hold?"
Victor Burek  :  "that's not gonna help"
Matthew Graham  :  "RTRS- ISM NON-MANUFACTURING EMPLOYMENT INDEX 59.6 IN JULY VS 52.7 IN JUNE"
Matthew Graham  :  "RTRS- ISM REPORT ON U.S. NON-MANUFACTURING SECTOR SHOWS PMI 60.3 IN JULY (CONSENSUS 56.2) VS 56.0 IN JUNE"
Victor Burek  :  "I would say he would think no big enough miss...185k is still a pretty strong number"
Christopher Stevens  :  "Love to ask Lockhart that question SV"
Scott Valins  :  "now it's ISMs turn or was that not a big enough miss?"
Matthew Graham  :  "RTRS- REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR JULY WAS FOR INCREASE OF 215,000 JOBS"
Matthew Graham  :  "RTRS- ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 185,000 PRIVATE SECTOR JOBS IN JULY"