A Week of Reassurance For The Bond Market
Last week saw the first major break higher after a calm, sustained moved toward lower rates that began in mid-June. This week had a chance to confirm the drama or push back against it. Thankfully, it was the latter, even though the mortgage market had some of its own specific drama to cope with.
20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
Markit Composite PMI 54.7 vs 50.3 prev
Services PMI 54.8 vs 51.0 f'cast
Manufacturing PMI 53.6 vs 51.9 f'cast
Existing Home Sales 5.86m vs 5.38m f'cast, 4.70m prev
Bonds were modestly stronger overnight in a move that lines up very well with outflows in the stock market. 10yr yields are down 2.75bps at .625 and 2.0 UMBS are up 3 ticks (0.09).
Steady losses leading up to PMI data and then some sharper weakness immediately thereafter. Treasuries back to unchanged (almost 3bps off the lows). MBS down almost an eighth of a point on the day and more than an eighth from morning highs.
Treasuries fought back into slightly stronger territory and have been sideways since then. MBS continue underperforming and remain near the lows of the day.
Both Treasuries and MBS rallied into the end of the day with 2.0 coupons actually turning green by 1 tick (0.03). 10yr yields ended the day down 1.62 bps at .6363%. All this despite a stock rally that left S&P futures up a third of a percent.