Lock/Float Considerations Ahead of Jobs Report
Bonds made it through Thursday without any notable volatility, let alone actual drama. That's been the case for the entire week as Friday's jobs report has been the obvious attraction. Unlike the rest of the week, post-NFP drama is definitely possible tomorrow, for better or worse. With rates at their lowest levels in 2 months, Treasury yields close enough to the bottom of their recent trading range, and 6 consecutive trading sessions with slightly lower end-of-day 10yr yields, the case for a defensive lock bias is compelling in the same way someone might wish to cash in their chips after a better-than-expected winning streak. That doesn't mean rates can't improve tomorrow (always best to look at that as a 50/50), just that there's higher risk without a perfectly commensurate increase in reward.
Fed MBS Buying 10am, 1130am, 1pm
Jobless Claims 498k vs 540k f'cast, 590k prev
Challenger Job Cuts 22.9 vs 30.6, 34.5 prev (79.6 before that!)
Calm and flat overnight. Slightly weaker after the 8:30am econ data (strong jobless claims and Challenger job cut reports). 10yr up about 1 bp and MBS down a tick (0.03).
Treasuries have traded both sides of 'unchanged,' but MBS have been doing just a bit better. 2.5 UMBS coupons are up 2 ticks (0.06) on the day and an eighth of a point from morning's lows. 2.0 coupons are 1 tick (0.03) off that pace.
Yields got as low as 1.557 before bouncing about 1bp higher (still slightly positive on the day). MBS are outperforming with 2.5 coupons up an eighth of a point. No salient market movers in play. On-again/off-again stock/bond correlation. Generally very quiet ahead of tomorrow's NFP.