- Bonds had an OK day overall, but MBS stuck it to Treasuries
- NFP 160k vs 202k forecast. Nothing interesting re: wages
- Fannie 3.0s ended 1 tick lower. 10yr yields ended 3.7bps higher
Any apprehension about the inability of NFP to create its characteristic level of market movement was well-earned today as bond markets fizzled sideways. We sometimes talk about “inside days” where the current trading range occurs completely “inside” the previous day’s trading range. With the exception of one brief rally during the knee-jerk minutes following NFP, today was an inside day for Treasuries. 10yr yields almost perfectly split the difference between yesterday’s highs and lows by the closing bell.
All that to say that there really wasn’t a reaction to NFP today. It’s nice that bond markets managed to keep most of the gains they’d earned this week, if nothing else.
The only other bonus was the fact that MBS did very well compared to Treasuries. Part of this is due to the shape of the yield curve. MBS have a shorter implied duration than 10 years, and shorter duration Treasuries outperformed today. The easier explanation would simply be the fact that MBS didn’t participate as much in this week’s rally leading up to today. Case in point, Fannie 3.0s barely budged on Wednesday while Treasuries rallied 3bps. In that context, today was just a solid opportunity for MBS to get caught up.
Whatever the case, several lenders’ rate sheets are in the best shape since May 6th, 2013.