Between the 5-day rally running the risk of getting tired, the technical resistance at .63%, the artificial extension of the rally thanks to huge stock selling, and the upcoming 3-day weekend, it made significantly more sense to err on the side of caution yesterday. Now today, we see just how true that was. Underlying sources of strength remain, so it will be very interesting to see how eager bond buyers are to push back next week.
Econ Data / Events
20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
Nonfarm Payrolls 1.371m vs 1.4m f’cast, 1.734m prev
Unemployment Rate 8.4 vs 9.8 f’cast, 10.2 prev
Participation Rate 61.7 vs 61.4 prev
Market Movement Recap
Bond yields were sideways to slightly higher in the overnight session with a bit more weakness showing up during European hours. Damage is minimal for now with 10yr up 1.14bps and 2.0 UMBS down only 1 tick (0.03). S&P futures are down 0.3%.
Yields were as high as .685 as stocks opened up stronger. We’ve bounced back a bit as stocks softened, but the day is young. 0.69% is the first technical level to watch for support.
MBS are outperforming, down only an eighth of a point.
New lows for the day just now in MBS (and a modest bounce back to previous lows). 2.0 UMBS down an eighth from post-NFP highs and .19 on the day. 10yr yields at new highs, up 5.55bps at .692%. Stocks still down big, but trying to bounce (and the bounce coincides with bond weakness).
MBS at new lows, down a quarter point at 103-02 (103.06). Treasury yields at new highs, up 7.7bps at .713%. Stocks are still down big on the day, but well off their intraday lows, and rising. Given the Treasury underperformance, we’re probably seeing more than a little bit of a concession for next week’s auctions.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
103-02 : -0-07
0.7230 : +0.1010
|Pricing as of 9/4/20 4:29PMEST|
Today’s Reprice Alerts and Updates
1:58PM : ALERT ISSUED: Moderate Negative Reprice Risk Remains; Treasuries Tanking
11:25AM : ALERT ISSUED: Negative Reprice Risk Increasing Slightly
9:50AM : A Bit More Weakness Now, But Potentially Finding Support
8:43AM : ALERT ISSUED: Losing Some Ground After “Stronger” NFP
MBS Live Chat Highlights
Matt Graham : “RTRS – POWELL ALSO SAID CENTRAL BANK ISN’T READY TO LET DOWN ITS GUARD ANYTIME SOON AND INTEREST RATES WILL STAY LOW FOR A LONG TIME – NPR”