Rough open for UMBS.  Down 27 bps early.   S&P futures down 9 points

Yields were mostly flat overnight with a bit of volatility in sympathy to European bond market volatility, but the domestic session is underway at almost perfectly unchanged levels.  Then we got S&P Global PMI

S&P Global PMIs =

Services 54.8 vs 51.3 f’cast,      [ 51.3 prev]

Manuf.  50.9 vs 50.0

This probably won’t be enough to derail our flat trading week, but the S&P PMI data is definitely causing intraday volatility.

Existing home sales fell 1.9% to a seasonally-adjusted annual rate of 4.14 million. “Home sales changed little overall, but the upper-end market is experiencing a sizable gain due to more supply coming onto the market,” said NAR Chief Economist Lawrence Yun.

Housing inventory is up, which is good news for activity overall. It rose to 1.21 million units which was a 9% bump from last month and 16% from a year ago. This represents a 3.5 month supply at the current sales pace. This is still on the low side – a balanced market is about six month’s worth

The median home price rose 5.7% YOY to $407,600.

The FOMC minutes from the May meeting support the “higher for longer” narrative.  Some of the participants raised the possibility that unusually strong seasonal patterns might have been behind the negative surprises in inflation at the beginning of the year. They also noted signs that the consumer is beginning to run out of steam, noting increases in credit use and buy-now-pay-later program usage.

Perhaps fate was tempted by our persistent focus on this week’s absence of big ticket market movers.  Or perhaps this is simply the biggest possible reaction to one of the week’s only potential market movers coming in MUCH higher than expected.  After all, the mantra has been that nothing that happens inside a range of 4.34 to 4.50 in 10yr Treasury yields is interesting.

While that remains true in the bigger picture, today’s reaction to the S&P Global Services PMI data was about as interesting as an uninteresting thing can be, causing an immediate spike from 4.42+ to 4.49+.  While the size of the beat is certainly surprising (54.8 vs 51.3 f’cast), the market reaction to such an event is logical.

UMBS closed the day down 26 bps, at 100.11