Data-Driven Rally, But There’s Bigger Data Ahead

Yesterday’s economic data made for a bit of back and forth in the bond market with Fed speakers ultimately riding to the rescue by forwarding the notion of “skipping” a rate hike at the upcoming meeting.  Today was a bit different with the AM econ data largely coming across in a bond-friendly manner.  This was especially true of Q1 unit labor costs which missed estimates by a wide margin.  Traders have increasingly moved on from debt ceiling headlines and are now turning their attention to Friday’s jobs report as casting the tie-breaking vote on whether this week’s events merit a return to the previous 3.4-3.6 range in 10yr yields. 

Econ Data / Events

Challenger Job Cuts

80.1k vs 92k f’cast

ADP Employment

278k vs 200k f’cast, 296k prev

Jobless Claims

232k vs 235k f’cast, 229k prev

Q1 Labor Costs

4.2 vs 6.3 f’cast, 3.3 prev

ISM Manufacturing

46.9 vs 49.8 f’cast, 50.2 prev

ISM Prices Paid

44.2 vs 52.0 f’cast, 53.2 prev

Market Movement Recap

08:27 AM slightly weaker after am data.  10yr down half a bp at 3.65.  MBS down just over an eighth, but illiquid.

09:09 AM Nice bounce back after 8:30am data.  MBS up nearly a quarter point and 10yr down 4.4bps at 3.601

02:49 PM MBS at best levels with 5.0 coupons up 3/8ths.  10yr down 4bps at 3.605