Every Bit the NFP Reaction We Expected

When it comes to bond markets reacting to economic data these days, don’t expect too much and you won’t be disappointed.  Heading into today’s NFP release, it didn’t make much sense to expect a major reaction, although there always tends to be more active trading in the few hours following the data.

That turned out to be exactly the case today.  Bonds began domestic hours in slightly weaker territory–largely as a carryover from yesterday afternoon’s weak momentum.  That’s not an analytical cop-out as much as it’s a comment on the absence of motivation in the overnight session and the gradual, thinly-traded nature of the weakness (i.e. move toward higher rates).

NFP came out with a stronger payroll count but with weaker wage growth.  Even in a month where it would be a bigger market mover, this still wouldn’t have been the report to do it (too equivocal).  Markets agreed and made sure to stay almost perfectly inside yesterday’s close and the overnight highs in yields for the rest of the day.  In that way, rates merely leveled off after yesterday’s push higher.

Next week brings inflation data, more potential tax bill developments, and a Fed Announcement.  The Fed will certainly hike, but markets will nonetheless tune in to see how the future rate hike outlook changes (it’s one of the 4 out of 8 meetings a year where forecast info is released).  

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

10:45AM  :  ALERT ISSUED: Gradual Weakness Adding Up To Reprice Risk For a Few Lenders

8:45AM  :  NFP Produces Mixed Reaction in Bonds