NFP missed the mark and bonds ultimately rallied today. That rally sets up a solid lock opportunity (either "today" or "soon," depending on your risk tolerance) as we expect to be right back in this position in the near future? What position is that? The one where markets are wondering if we're about to get econ data that will accelerate the Fed's tapering conversation. Today's jobs data says "not yet." That's good for rates in the short term, but it creates bigger risks in the coming weeks (perhaps days).
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Fed MBS Buying 10am, 1130am, 1pm
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Nonfarm Payrolls 559k vs 650k f'cast, 278k prev
Unemployment Rate 5.8 vs 5.9 f'cast
Participation Rate -0.1 (offsets U/E decline)
Slightly weaker overnight and slightly stronger after lackluster NFP (INITIALLY!). VERY light reaction relative to expectations. Now turning negative again with 10yr yields up 1bp at 1.635 and MBS back to unchanged (down 2 ticks or 0.06 from the highs).
Safe to say the market has decided (finally) that this morning's NFP number isn't big enough to justify the recent ramp in Fed taper talk fear. Both stocks and bonds are improving now in the typical, symmetrical "friendly Fed" pattern (chart HERE). 10yr down 4bps at 1.584 and 2.0 UMBS up more than a quarter point at 101-01 (101.03).
gradually weaker in the PM hours with MBS underperforming slightly. 2.0 coupons are still at 101-01, but they were an eighth of a point higher at noon. 10yr yields are up to 1.564 after being as low as 1.557.
MBS Market Alerts
