ISM Makes For Negative NFP Lead-Off

If the bond market has to digest an ISM Services report that is much stronger than expected, it would be best not to have it come out less than 24 hours before the big jobs report.  Otherwise, you get a day like today where the data fueled a pre-NFP (nonfarm payrolls–the headline component of Friday’s jobs report) lead off toward higher rates.  

Econ Data / Events

Jobless Claims

225k vs 220k f’cast, 219k prev

S&P Services PMI

55.2 vs 55.4 f’cast, 55.7 prev

ISM Services

54.9 vs 51.7 f’cast, 51.5 prev

ISM Employment

48.1 vs 50.2 prev

ISM Prices

59.4 vs 56.3 f’cast, 57.3 prev

ISM Activity

59.9 vs 53.3 prev

Market Movement Recap

08:34 AM Weaker overnight and no major reaction to Jobless Claims.  MBS down 3 ticks (.09) and 10yr up 2.6bps at 3.81

10:05 AM Weaker after ISM. 10yr yields are now up 5bps at 3.833 and MBS are down another 3 ticks (.09) for a total of 6 ticks (.19) on the day. 

03:16 PM pre-NFP drift toward weaker levels.  MBS down 9 ticks (.28) and 10yr up 6.3bps at 3.846

05:13 PM bonds closed near weakest levels, and right in line with the previous update.