UMBS opened up 16 bps.   S&P futures up 13 points

The S&P PMI data (previously “Markit”) has increasingly been a tradeable event in the past few years and we have the latest example just now.  10yr yields were up near 4.65 just before the data, but dropped a quick 4+ bps to 4.603.  This brings them down just under 1bp on the day.

S&P Services PMI = 50.9 vs 52.0 f’cast

S&P Manufacturing PMI = 49.9 vs 52.0 f’cast

MBS spreads (which are the difference between the yield on a mortgage backed security and Treasuries) have contracted meaningfully since last fall. This means that while the 10 year has increased in yield, the mortgage rates have risen less.

March existing home sales slipped 4.3% M-o-M to a seasonally adjusted rate of 4.19 million, the biggest M-o-M decline since 11/22. The February rise in mortgage rates undoubtedly hurt. Y-o-Y sales eased 3.7% to 4.35 million. March is now the 31st consecutive month with sales down Y-o-Y. It’s also possible that uncertainty regarding Realtor commissions has caused some transactions to be delayed. An inauspicious start to the spring selling season.

Tuesday’s session was infinitely more interesting than Monday’s with the caveat being Monday was a total snooze-fest.  Bond market volumes were much closer to recent averages and there was even some logical, data-driven volatility.  As always, volatility can go both ways and today’s went the right way after S&P PMIs came in well below forecast in both Manufacturing and Services sectors.

Relative to recent norms, the move was far from big, but it looked big compared to Monday.  Notably, even before the data, yields were holding under the technical level at 4.65.  The gains merely solidify the sideways vibes that have been in place since the middle of last week.

UMBS closed up 14 bps at 99.61