What's Up With Friday's Sell-Off?

Bonds lost ground today and it definitely wasn't as simple as traders having second thoughts about the strength of today's jobs report.  While it's true that the 3.8% unemployment rate overstated last month's shift (due to the rise in the participation rate), it's also true that this is the first time since 2020 that NFP has been under 200k for 2 consecutive months (revisions are unlikely to change that, given the prevailing trend).  The lopsided nature of the selling pointed to yield curve considerations and the odd combination of positioning for an NFP Friday, a Friday before a 3 day weekend, and the first day of a new month all at the same time. It wasn't officially an early closer, but the bond market got in and got out by lunch, leaving 10yr yields 7.5bps higher.  MBS only lost an eighth and change due to curve steepening (shorter-term yields fared better and MBS aren't expected to be as long-lived as 10yr Treasuries).

Econ Data / Events
    • NFP
      • 187k vs 170k f'cast, 157k prev
    • Unemployment 
      • 3.8 vs 3.5 f'cast/prev
    • Participation Rate
      • 62.8 vs 62.6 prev
    • Wages
      • 0.2 vs 0.3 f'cast, 0.4 prev
    • ISM Manufacturing PMI
      • 47.6 vs 47.0 f'cast, 46.4 prev
    • Construction Spending
      • 0.7 vs 0.5 f'cast, 0.6 prev
Market Movement Recap
08:57 AM

Initially stronger after jobs data but gains evaporating now.  10yr down only 1.1bps at 4.095.  MBS up 3 ticks (0.09), but down an eighth from the highs. 

09:43 AM

Well into the red now with 10s up 3.2bps at 4.134 and MBS down almost an eighth. 

10:44 AM

Weakest levels of the day with 10yr up 7.5bps at 4.18 and MBS down 3/8ths. 

03:09 PM

Decent recovery after the last update with 10yr yields grinding down to 4.17% and MBS now down only an eighth of a point.

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