Wild Ride Leaves MBS Weaker After Super Strong Start

Bonds surged to stronger levels overnight amid a global stock meltdown and flight to safety.  There are several different ways to look at the past several trading days in terms of assigning blame/credit to various motivations.  The reality is almost always some sort of “combo deal” and that’s likely the case this time although the most notable x factor may be the “carry trade” involving Japanese Yen and a perfect storm created by last week’s calendar events (Fed announcement, Bank of Japan rate hike, weak US econ data including jobs report).  10yr yields hit 3.666 at their lows of the day, but closed just under 3.80.  The biggest source of push-back was the decent ISM data this morning, but there was correctional momentum before and after that as well.

Econ Data / Events

ISM Services

51.4 vs 51.0 f’cast, 48.8 prev

ISM Biz Acitivity

54.5 vs 49.6 prev

ISM Prices

57.0 vs 55.8 f’cast, 56.3 prev

Market Movement Recap

08:56 AM Sharply stronger overnight in a global flight to safety.  10yr off best levels, but still down 9bps at 3.698.  MBS up 7 ticks (.22)

10:28 AM Weakest levels of the day after ISM data.  MBS down 1 tick and 10yr up 2bps at 3.768

11:36 AM Negative territory now with MBS down an eighth and 10yr up 1bp at 3.799

02:59 PM Sideways near weakest levels for MBS, down an eighth on the day.  10y half a bp lower at 3.783