Huge Jobs Report, Logical Weakness, and a Nice Bounce, But...
Bonds did quite well today considering Powell's endorsement of higher rates (yesterday) combined with this morning's significantly stronger jobs report. Most of the push back was seen in MBS, however, and even then, closing levels are only really worthy of enthusiasm when compared to the past 26 hours. The rising rate narrative remains intact until further notice. Could next week's Treasury auction cycle finally be the thing that helps us identify a tactical opportunity for rates to recover? Sure! But betting on such things ahead of time has been costly. Wait for confirmation.
Fed MBS Buying 10am, 1130am, 1pm
Bonds were modestly weaker in Asia, bounced back modestly in early European trading and are weakening again on the approach to the jobs report. 10yr is 1.4bps higher at 1.573. UMBS 2.5 coupons are down 2 ticks (.06).
Heavy selling after huge NFP number. That said, we could imagine much worse given the size of the beat and revisions. 1.62% may try to hold in 10yr yields. Just under there now. Counterpoint: oftentimes these initial, supportive bounces merely mark consolidation before more selling. Too soon to tell.
Good buying/support after the initial sell-off. While we don't really know how much of the strength is attributable to short-covering, we've covered enough ground so far to avoid completely giving up hope. 10yr and MBS are both effectively 'unchanged' on the day now (although yesterday's closing levels weren't great... so take that with a grain of salt).
Nice, stable afternoon with moderately higher MBS prices giving way to just a bit of late day weakness. Nothing to see here (probably). Only 20 minutes to go anyway! 10yr remains unchanged and UMBS 2.5s are up nearly a quarter point still.