Big Market Reaction but Mortgages Outperform

Today’s jobs report would have been bad for rates if it was even in line with expectations.  After it came out stronger than expected (especially in terms of the unemployment rate at 4.1 vs 4.3 f’cast), it was off to the races for bond sellers.  The short end of the yield curve has the most in common with Fed rate expectations, so it took the most damage, but MBS fared far better.  Perhaps that has something to do with the government not issuing MBS to fund the just-passed spending bill or perhaps it is a nod to next week’s uncertain levels of demand for the scheduled Treasury auctions. Either way, we won’t complain. Friday is closed for the holiday, and next week may as well be a holiday because everyone’s waiting for July 15th CPI.

Econ Data / Events

Nonfarm Payrolls

147k vs 110k f’cast, 139k prev

Unemployment rate

4.1 vs 4.3 f’cast, 4.2 prev

ISM Services

50.8 vs 50.5 f’cast, 49.9 prev
prices: 67.5 vs 67.7 prev
employment: 47.2 vs 50.7 prev

Market Movement Recap

09:14 AM Sharply weaker after jobs data, but recovering somewhat.  MBS down an eighth of a point and 10yr up 5bps at 4.33

02:24 PM Very flat after AM sell-off, and now closed for the day.  MBS down 6 ticks (.19) and 10yr up 6.7bps at 4.347