Bonds rallied today, both before and after the weak ISM Non-Manufacturing data. "Weak" is a relative term considering 60.1 is one of the 10 best results for this report in 16 years. Notably, most of the day's rally was intact BEFORE the data came out. That's a reassuring start to a holiday-shortened week that ran the risk of being distorted by lighter volumes and a potential push back against Friday's post-payrolls gains.
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Fed MBS Buying 10am, 1130am, 1pm
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ISM Non-Manufacturing 60.1 vs 63.5 f'cast, 64.0 prev
Little changed from Friday's close after starting slightly weaker overnight and rallying back to 'unchanged' by the domestic open. 10yr down to 1.425 and 2.0 UMBS up 2 ticks at 101-07 (101.22).
Tradeflows were bond-friendly following the 9:30am NYSE open and gains kicked into higher gear after weaker ISM Services data. 10yr down under the 1.38% (1.367%) technical level and MBS up a quarter point.
MBS have been underperforming since noon, but are still up more than a quarter of a point. The 10yr rally bottomed out at 1.351 and has retraced to 1.365% currently. No major market movers in play.
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