MBS Pricing Snapshot

Post ISM data, and possibly with a slight ear bent toward Bullard comments from around the same time, bond markets have given back some of the post-NFP rally. At the moment, this amounts to exactly HALF of today's gains in MBS, but we've been fighting off further weakness since 10:15am.

In terms of Fannie 3.0s, that puts the bounce in at 103-16 (super salient pivot point!) with current prices back up to 103-18. In terms of 10yr yields, the support has come in at 1.87 (SUPER salient pivot point!!!) with yields back down toe 1.96 now. The stock lever has been helpful.

Holding on the friendly side of these pivot points is very good, and if that's as weak as we get, it's a pretty acceptable and explainable amount of volatility in the context of a broader positive move following NFP. If we cross back over these pivots, however, things become a bit cloudier, and a bit less positive for the rest of the day. For now, it looks like the big volume and big support is already in place at the 1.97 pivot, and unless we cross back above, the takeaway from this morning continues to be positive.

- Headline PMI up to 53.1 vs 50.6 Consensus
- New Orders 53.3 vs 49.7 Previously
- Employment Index 54.0 vs 51.9 Previously
- Reaction: this has served as a counterpoint to the NFP rally, albeit a smaller one. MBS are 5 ticks off highs, still up 12 ticks on the day at 103-20

The PMI registered 53.1 percent, an increase of 2.9 percentage points from December's seasonally adjusted reading of 50.2 percent, indicating expansion in manufacturing for the second consecutive month. The New Orders Index registered 53.3 percent, an increase of 3.6 percent over December's seasonally adjusted reading of 49.7 percent, indicating growth in new orders. Manufacturing is starting out the year on a positive note, with all five of the PMI's component indexes — new orders, production, employment, supplier deliveries and inventories — registering above 50 percent in January.

Treasuries traded in slightly weaker territory overnight but in a fairly narrow range. NFP anticipation had clearly kept bond markets disinterested in any big deviations from the post-FOMC path, save for a slow, incremental leak to marginally higher yields.

As many had surmised, bond markets seem to have been accounting for a more damaging number than the forecast when it came to NFP. Even with the positive past revisions, the 'as-expected' headline job creation has, thus far, paved the way for a fairly easy move toward better levels.

There has been a good amount of volatility in getting to where we are now, but considering the recent dynamics between tactical (shorter term, leveraged, "fast money") and strategic (longer time horizons, unleveraged, "real money") accounts, this volatility was not only to be expected, but has also played out in a fairly scripted manner. Those "fast money" accounts got into, out of, and back into the rally, all the while with underlying support from "real money."

The result has been the expected, "slippery surface" back towards 1.92 (10yr yields) that we expected on an average NFP print. Fannie 3.0's have easily broken 103-16 resistance and are currently up 14 ticks at 103-22.

All in all, this morning has been like opening a new can of tennis balls. Pop! Pressure being released. And they're green!

- NFP 157k vs 160k Consensus
- Private Payrolls +166 vs +165 Consensus
- U/E 7.9 vs 7.8 Consensus
- Revisions: DEC from 155 to 196k, NOV from 151 to 247k - Reaction has been choppy, mostly in the Green, but recently back toward unchanged (possibly revision digestion, or indigestion for bond markets). This leaves some room for the rest of the day's data to have an impact.

Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Retail trade, construction, health care, and wholesale trade added jobs over the month.