On a week that started with a downbeat ISM Manufacturing report and a day that began with a weak ADP employment report, this morning's ISM Non-Manufacturing numbers were surprising enough to get bond sellers fired up. But the ongoing economic reality (the one where covid case counts are rising at their fastest pace since the start of the pandemic and where the Fed is waiting at least a month or two longer before dialing back its bond purchases) told the sell-off to take a seat. After a tense little stand-off, that's exactly what happened.
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Fed MBS Buying 10am, 1130am, 1pm
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ADP Employment 330k vs 695k f'cast, 680k prev
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ISM Non Manufacturing 64.1 vs 60.5 f'cast
Stronger overnight with additional gains after ADP Employment. But a big reversal after stronger ISM data. MBS now down an eighth and 10yr yields up 2bps to 1.194
Weakness snowballed a bit before leveling off with 10yr yields up 4bps at 1.214. These are the highs of the day, so we can't rule out another move higher. 2.0 UMBS are down a quarter point on the day and 3/8ths from the morning's highs.
Nice bounce underway. 10yr back to 1.177--basically unchanged. UMBS 2.0 down only an eighth on the day now (vs a quarter point last time).
The recovery has established itself well enough at this point with 10s less than 1bp higher on the day still. MBS have picked up a bit more ground, now down only 2 ticks (0.06) on the day.
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