MBS RECAP: Bond Markets ‘Reset’ to Pre FOMC Levels After Jobs Report


There is a disturbing lack of utter certainty when it comes to financial markets, and especially to the effect of economic data on MBS Prices.  Case in point, the last jobs report beat consensus by more than 20k, yet MBS rallied.  That was a mere 20k though…

Today’s jobs report brought the kind of eye-watering departure from forecast results that we almost never see.  It therefore offered the sort of utter certainty we almost never enjoy.  Suffice it to say, a 108k miss in Nonfarm Payrolls is unequivocally good for bond markets, especially when they’ve been flat-to-weaker.

Treasury and MBS prices broke north with no delay.  10’s plummeted from 2.96 to 2.89, retraced to 2.93 and then continued trending steadily lower.  They’re presently slinking out the door just under 2.86. 

Fannie 4.0s underwent a similar 7 steps forward, 4 back, 15 more forward to current levels that are 26/32nds higher on the day at 103-23.  With just a few hours excepted, this pretty much wipes out all the weakness in December.  Of course it may simply come back again, but not today anyway, perhaps longer, depending on next week’s data.

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