Bonds Hold On to NFP-Driven Gains Despite Some Push-Back

Whether you view it as a perfectly logical reaction to NFP coming in at 175k vs 243k or a bit too much of a rally relative to the motivation, no one could argue that bond yields were destined to drop after seeing this morning’s jobs report.  But employment data is only worth so much these days.  The main event continues to be inflation and we were reminded of that with the 10am ISM Services data.  The ISM headline was actually rate friendly, but the inflation component was the bigger mover, and it was not friendly.  Bonds lost almost all of their post-NFP gains in response, but managed to level off in the PM hours.  Combined with the 2 previous days of green, the net effect is the best closing levels since April 9th.

Econ Data / Events

Nonfarm Payrolls

175k vs 243k f’cast, 315k prev

Unemployment Rate

3.9 vs 3.8 f’cast/prev

Wages

0.2 vs 0.3 f’cast, 0.3 prev

ISM Non Manufacturing

49.4 vs 52.0 f’cast, 51.4 prev

ISM Prices

59.2 vs 55.0 f’cast, 53.4 prev

Market Movement Recap

08:43 AM Modestly stronger overnight with additional gains after NFP data.  10yr down 8bps at 4.50, and MBS up 3/8ths

10:15 AM losing some ground after ISM.  MBS still up 11 ticks (.34) and 10yr down 5.3bps at 4.526

02:16 PM gradually bouncing back and now sideways in the middle of the post-NFP range.  MBS up 3/8ths.  10yr down 7.3bps at 4.507

04:49 PM Very flat since noon with MBS up 11 ticks (.34) and 10yr yields down 8bps at 4.499.