Strong Data Redefining The Rate Outlook

Between Wednesday's ISM Services data and Friday's jobs report, the market was faced with two compelling "yeah buts" to what has generally been a symphony of economic bearishness over the past few weeks.  Whereas inflation reports in June and July ultimately didn't ultimately didn't extend the market's perceived timeframe for the Fed's first rate cut in 2023 (i.e. June Fed Funds Futures were back to late May levels by the start of this week) the strong data abruptly changed that.  After today, there's little if any rate cut probability priced into 2023's outlook.  That will change, but until it does, it's rough sledding for rates.

Econ Data / Events
    • Nonfarm Payrolls
      • 528k vs 250k f'cast, 398k prev
    • Unemployment Rate
      • 3.5 vs 3.6 f'cast, 3.6 prev
    • Hourly Earnings 
      • 0.5 vs 0.3 f'cast
      • prev revised to 0.4 from 0.3
Market Movement Recap
08:49 AM

Big sell-off following the big beat in the jobs report.  10yr yields up 10bps to 2.792 and 4.0 UMBS down nearly 3/4ths of a point.  Stocks down 1% due to Fed policy implications. 

10:31 AM

Additional weakness after the last update, but possibly (hopefully?) leveling off now.  MBS down almost a full point and 10yr yields up 14.4bps at 2.838.

01:39 PM

Slow, steady recovery, but not making much of a dent yet.  MBS now down "only" 3/4ths of a point and 10yr yields up only 13.5bps at 2.83% (previously as high as 2.87%).

03:32 PM

Brief, illiquid dip in MBD just before the 3pm close, but back in line with previous levels now.  4.0 coupons down 7/8ths of a point on the day and 10yr yields up 13.3 bps to 2.827

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