Man!  UMBS down another 15 bps on the open.  Stock futures down 41.5

April is not shaping up to be a great month for bonds if the first two days are any indication.  Treasuries did a good job of ignoring the initial spike in European bond yields.  This was the right move considering Europe was closed yesterday and it was a foregone conclusion that yields would need to rise to catch up to the U.S. bond market.

But Europe sold off again later in the session following a series of stronger PMI reports.  Japan’s warning of intervention on Yen weakness set an unsupportive tone in the background.

Job Openings = 8.756m vs 8.75m f’cast,   [ 8.748m prev]

Quits Rate = 3.848m vs 3.385m prev

If either of the two numbers above had been much higher than expected, it would have been bad news for rates.  With the results being about as close to “as-expected” as it gets, it’s not surprising to see an absence of any major reaction.

Construction spending fell 0.3% MOM in February, according to Census. This was up 10.7% compared to a year ago. Residential construction rose 0.7% MOM and 6.5% YOY. We continue to see a big bifurcation of single-family versus multifamily. Single family private construction rose 1.4% MOM and 17.2% YOY while multi-family construction fell 0.2% MOM and rose only 6.1% YOY.

Bonds began the day in much weaker territory as Treasuries followed European yields higher after a series of stronger PMIs overnight. Domestic traders added to the weakness early with 10yr yields hitting their highest levels since November.  Bonds found their footing after an as-expected JOLTS report and MBS even made it all the way back to “unchanged” just before 3pm.  Nevertheless, 10yr yields had broken their recent 4.32% ceiling.  As always technical levels don’t predict the future.

This breakout reinforces the headwinds of the past few weeks and acknowledges the risks associated with the incoming data.  If that data is friendly, this will not look like an important technical breakout in hindsight.  But the opposite is also true: stronger data would make this breakout look like ominous foreshadowing.

UMBS closed the day up 7 bps at 100.67

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