Bonds a Bit Nervous as Big Data Week Begins
If there was ever a time when economic data was inconsequential as a market mover, the post-covid era is surely a front-runner. That said, we know this dynamic will begin to change as the temporary distortions and volatility work themselves out. We've already seen bonds react to nonfarm payrolls a few times--even if only temporarily. As such, we're unable to dismiss the jobs report as a non-event. Bonds seem to be starting out the current week erring on the side of caution, in case the data reignites a bullish case for the labor market.
Fed MBS Buying 10am, 1130am, 1pm
ISM Manufacturing 61.2 vs 60.9 f'cast, 60.7 prev
Construction Spending 0.2 vs 0.5 f'cast, 1.0 prev
Much weaker overnight with most of the damage happening in low-volume futures trading during Asian market hours. Things haven't improved during European hours or early in the the domestic session for that matter. 8:20am CME open saw more volume and selling, thus suggesting a "new month" positioning move.
Bonds are recovering a but as we head into the end of the European trading session (though not necessarily because of it). 10yr yields now up only 3.4 bps to 1.615% and 2.5 UMBS down less than an eighth on the day.
After rallying into the PM hours, bonds have been flat in a very narrow range. Trading levels are the same as the last update although MBS have gained another tick (0.03) and are now down only 2 ticks (0.06) on the day.