In hindsight, this has turned out to be a simple morning for bond markets.  That wasn't the case earlier when we could only guess at the likely culprits behind a pervasive--even counterintuitive--push toward weaker levels.  Then again, maybe that should have been the first clue.

Pervasive, counterintuitive moves are a hallmark of the sort of tradeflow-driven momentum seen near the end and beginning of any given month.  In fact, we've been talking about "new month" tradeflows as being a consideration as March gets underway, but with all the weakness in February, it was easier to hope or expect that the momentum would push back in a friendlier direction.

As it turns out, the opposite has been true so far today.  Traders had an agenda to sell from the outset and were merely waiting for opportunities and safety.  Selling became most safe after the morning's data was out of the way.  The 10am ISM data is one of the biggest reports of the month apart from NFP.  If it had been significantly weaker-than-expected, it would be hard to justify bond market selling on any grounds.  But it came in just 0.1 under the consensus.  Inclined sellers verdict: "close enough!"

Selling was exacerbated by an asset allocation trade (selling bonds to buy stocks).  Additionally, the corporate debt issuance cycle continues doing damage as there are already a few big deals to kick off the month.  Corporate issuance hurts MBS/Treasuries not only by providing competition for bond market dollars, but also because Treasuries are often sold as a part of the issuing firm's rate lock process.

The quick push to weaker levels leaves 10yr yields right at the upper edge of a very important technical zone from 2.04-2.075.  MBS have fared better by comparison.  Fannie 3.0 prices are only down 10 ticks on the day and are currently still inside Friday's range.  Treasuries are nowhere close.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
101-19 : -0-10
FNMA 3.5
104-19 : -0-08
FNMA 4.0
106-25 : -0-06
Treasuries
2 YR
0.6620 : +0.0400
10 YR
2.0730 : +0.0765
30 YR
2.6690 : +0.0756
Pricing as of 3/2/15 12:43PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:51AM  :  ALERT ISSUED: If you Haven't Seen a Reprice Yet, You Probably Will
10:56AM  :  ALERT ISSUED: Another Incremental Increase in Negative Reprice Risk
10:19AM  :  ALERT ISSUED: Paradoxical Reactions Continue as Bonds Weaken on Crummy ISM Numbers
9:34AM  :  Slightly Weaker After Morning Shuffle, but Finding Support

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Not in terms of scheduled events, but then again, it's not being driven by scheduled events either. Looks like traders showed up with goals today and data hasn't gotten in the way."
JBARRUTIA12  :  "looks like there is really nothing else "on tap" today to stop this bleeding?"
Matthew Graham  :  "That would be one of the only logical, overt ways to make sense of it, unless you assume that markets were tacitly prepared for a bigger miss."
Tim McNerney  :  "stock lever??"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX 51.4 IN FEB (CONSENSUS 54.0) VS 54.1 IN JAN"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING ACTIVITY INDEX 52.9 IN FEB (CONSENSUS 53.2) VS 53.5 IN JAN"
Jeff Anderson  :  "That's true. Beginning of month. Forgot. Been Groundhog Day for about 6 weeks here."
Matthew Graham  :  "i wouldn't assume the move is due to the data exclusively"
Jeff Anderson  :  "Personal consumption was the only beat. Carries more weight these days?"
Matthew Graham  :  "RTRS- US JAN CORE PCE PRICE INDEX +0.1 PCT (CONS +0.1 PCT)"
Matthew Graham  :  "RTRS - US JAN PERSONAL SPENDING -0.2 PCT (CONSENSUS -0.1 PCT)"
Matthew Graham  :  "RTRS- US JAN PERSONAL INCOME +0.3 PCT (CONS +0.4 PCT)"