After last week's anticlimactic reaction to the end of QE3, the current week offers up several places to look for the inspiration owed to bond markets.  Some of those places include historically important economic data, so a caveat is in order that economic data has been largely ignored for much of 2014.  Another caveat to that caveat: Friday's Employment Situation Report is always a market mover.

Beyond that though, we'll get several instances of Fed speeches and the week's biggest wild card, Thursday's European Central Bank (ECB) Announcement.   ECB policy is, in fact, the most likely reason that US markets have been willing to ignore domestic economic data this year.  Strong jobs numbers have been swept under the rug on several occasions when ECB balance sheet expansion made bigger headlines. 

While the ECB isn't expected to drop any bombs this time around, markets remain more interested in Europe's ongoing QE stalemate regarding direct sovereign debt purchases.  It seems that the ECB inches ever-closer to such purchases now that targeted ABS are already being bought and with corporate debt supposedly having been discussed.  In fact, the issue of corporate debt is sure to come up in Thursday's press conference with ECB President Draghi, and it would be seen as another brick in the path toward government bond buying.

As far as trading levels and related markets are concerned, the correlation between stock prices and bond yields really broke down heading into the end of October.  It had been strong since the previous FOMC Announcement in mid-September.  One remaining point of interest, however, is that stocks (as represented by S&P futures below) still haven't broken back above previous all-time highs in September.  10yr yields were closer to 2.7 then, but now seem to be treating the long term inflection point of 2.34% as a supportive ceiling.  Holding under that would be the best-case scenario for this week in terms of broad bond market momentum. 

2014-11-2 lever

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
100-00 : +0-00
FNMA 3.5
103-12 : +0-00
FNMA 4.0
106-05 : +0-00
2 YR
0.4980 : +0.0006
10 YR
2.3230 : -0.0123
30 YR
3.0520 : -0.0142
Pricing as of 11/3/14 7:25AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Nov 03
10:00 Construction spending (%)* Sep 0.7 -0.8
10:00 ISM Manufacturing PMI * Oct 56.2 56.6
Tuesday, Nov 04
8:30 International trade mm $ (bl)* Sep -40.0 -40.1
10:00 Factory orders mm (%) Sep -0.6 -10.1
Wednesday, Nov 05
7:00 Mortgage Market Index w/e 386.1
8:15 ADP National Employment (k)* Oct 220 213
10:00 ISM N-Mfg PMI * Oct 58.0 58.6
Thursday, Nov 06
8:30 Initial Jobless Claims (k)* w/e 285 287
Friday, Nov 07
8:30 Private Payrolls (k)* Oct 220 236
8:30 Non-farm payrolls (k)* Oct 231 248
8:30 Unemployment rate mm (%)* Oct 5.9 5.9
8:30 Manufacturing payrolls (k)* Oct 10 4
8:30 Average workweek hrs (hr)* Oct 34.6 34.6