Rates Rally Cautiously After ISM Services Data

On the approach, today’s ISM Services PMI looked like the 2nd biggest report of the week.  In practice, bonds only managed a modest rally in response.  The measured response wasn’t for a lack of motivation in the data itself.  It was very rate-friendly (lowest inflation component since mid-2020!). Rather, rates have been treated to two straight days of strong bullish cues (ISM Manufacturing/JOLTS) and may simply be losing their appetite for additional gains given the unknowns presented by Friday’s jobs report and next week’s CPI.

Econ Data / Events

ADP Employment

145k vs 200k f’cast, 261k prev

ISM Non Manufacturing

51.2 vs 54.5 f’cast, 55.1 prev
prices: 59.5 vs 65.6 prev
employment: 51.3 vs 54.0 prev

Market Movement Recap

08:19 AM Bonds rallying after ADP data.  MBS up 3 ticks (.09), but probably closer to 6 ticks (.19) if trading was more liquid. 10yr down 3.4bps at 3.305.

10:29 AM More gains after ISM Services data.  MBS up an eighth and 10yr yields down 4bps at 3.3%.  Both were briefly even stronger 

01:12 PM Holding moderate gains with 10yr down 5bps at 3.29 and MBS up 6 ticks (.19).

03:32 PM 10yr yields at the highest levels in several hours, but still down nearly 4bps on the day at 3.301.  MBS up 3 ticks (.09) officially, but would likely be another 2-3 ticks higher with liquidity.