Data Confirms Bond Market Fears

Yesterday's recap suggested that bonds were bracing for impact from incoming economic data.  It turns out that much more bracing would have been needed to avoid a big sell-off.  Even then, it would have been hard to brace for an ADP 'beat' as big as the one we saw (497k vs 228k f'cast, 278k prev). With the big jobs report up tomorrow and NFP forecasts in the same territory, bonds were right back to "bracing" mode today. The surrounding data wasn't quite as extreme, but none of it helped push back in a friendly direction. 10yr yields quickly crested 4% and MBS lost over half a point (nearly a full point at the weakest levels of the day). 

Econ Data / Events
    • ADP Jobs
      • 497k vs 228k f'cast, 278k prev
    • ISM Services
      • 53.9 vs 51.0 f'cast
    • ISM Activity index
      • 59.2 vs 51.9 f'cast
    • ISM Prices
      • 54.1 vs 56.2 f'cast
    • ISM Employment
      • 53.1 vs 49.2 f'cast
    • Job Openings
      • 9.8m vs 9.935m f'cast, 10.103m prev
Market Movement Recap
09:06 AM

Only modestly weaker overnight, but heavy losses after data.  MBS down 5/8ths and 10yr yields are up 10.7bps at 4.041

01:54 PM

No major changes since the AM sell-off.  MBS down just over half a a point and 10yr up 11.9 bps at 4.053.

04:03 PM

Illiquidity is the only thing moving MBS at this point.  Prices settling into a half point loss on the day.  10s up 10.5bps at 4.039.

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