It’s actually fairly impressive to see Fannie 3.5 MBS “only” down 11 ticks on a day when the jobs report came in at 321k vs 230k forecast. There was widespread consensus among MBS Live members today that the losses felt minimal in light of the ‘beat.’ Not only that, but rate sheets were fairly gentle as well, with some morning rate sheets actually staying right in line with yesterday’s rates. That’s AFTER the jobs report this morning, mind you.
So what gives with the bond market resilience?
We have a fair number of supportive anecdotes to choose from. Relating most directly to the jobs data itself, I noted in an earlier update that the seasonal adjustment factor for this November was quite a bit more aggressive than last November. 64.6% of the unadjusted payrolls were counted this time compared to 48.2% last time. If we’d used the 48.2%, today’s report would have been 239k instead of 321k. Food for thought.
Additionally, others have made wide mention of the fact that only 4k jobs were added according to the household survey (the jobs report is 2 surveys: household + establishment). Of course, we never put much stock in the household survey compared to the establishment survey, but it’s just another “yeah but” for those looking for such things.
Ultimately, we also have to consider the non-data-related reasons for resilience. These make good sense as well, and they include an absence of corporate debt issuance today (not much anyway), an absence of European sovereign QE in yesterday’s announcement (the theory being that EU QE would actually be bad for US rates as it would sooth “global growth concerns”), and positive technical factors. Whatever the combination of causes, the result speaks for itself. If next week confirms the resilience the approach to the end of the year looks good.