MBS MID-DAY: Slightly Weaker Since ISM, Prices Grind Sideways


– ISM Non-Manufacturing PMI 56.0 vs 53.0 forecast
– Prices Paid 60.1 vs 52.5 previously
– Business Activity 60.4 vs 53.3 forecast
– New orders 57.7 vs 50.8 forecast
– Employment 53.2 vs 54.7 in June

– Market Reaction: Treasuries move higher in yield to 2.644 currently. MBS would like to follow the sell-off but are too illiquid to do so just yet (though it’s probably coming).

In July, the NMI™ registered 56 percent, indicating continued growth in the non-manufacturing sector for the 43rd consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

ISM’s Non-Manufacturing Business Activity Index in July registered 60.4 percent, 8.7 percentage points higher than the 51.7 percent registered in June. This month’s reading reflects the highest reading for the index since December 2012, when the index registered 60.8 percent. Twelve industries reported increased business activity, and four industries reported decreased activity for the month of July. Comments from respondents include: “Large projects starting” and “Volumes are slightly higher, mostly due to housing.”

Employment activity in the non-manufacturing sector grew in July for the 12th consecutive month. ISM’s Non-Manufacturing Employment Index registered 53.2 percent, which reflects a decrease of 1.5 percentage points when compared to the 54.7 percent registered in June. Twelve industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “Employment ramp up” and “Adding staff in anticipation of new store openings.”

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