Bonds Unexpectedly Forced to Focus on War Instead of Data

Just 30 minutes before the month’s most important week of economic data was about to hit its stride, headlines hit the newswires regarding an imminent missile attack on Israel.  While various iterations of such headlines are unfortunately common, these examples got the market’s attention, resulting in a quick “flight to safety” trade (stock prices and bond yields moved lower).  When the AM econ data came out 30 minutes later, the impact on bonds was insignificant by comparison.  The initial flight to safety was unwound in the afternoon, but bonds remained in moderately stronger territory on the day.

Econ Data / Events

S&P Manufacturing PMI

47.3 vs 47.0 f’cast, 47.9 prev

ISM Manufacturing

47.2 vs 47.5 f’cast, 47.2 prev

ISM Prices Paid

48.3 vs 53.3 f’cast, 54.0 prev

Job openings

8.04m vs 7.66m f’cast, 7.71m prev

Job quits

3.084 vs 3.27m prev (lower is better for rates)

Market Movement Recap

10:30 AM Flight to safety rally after Israel/Iran headlines and then flat after data.  MBS up 5 ticks (.16) and 10yr down 7.9bps at 3.704

01:03 PM strongest levels for MBS with 5.0 up a quarter point.  10yr down 7.2bps at 3.711

02:03 PM weakest levels now with MBS still up 2 ticks (.06) and 10yr down 4.4bps at 3.739

03:46 PM Off the weakest levels now.  MBS up an eighth and 10yr down 4.3bps at 3.74.