UMBS are flat on the morning.  Which is actually a .08 improvement.

Bonds had been moderately stronger overnight, following EU bonds on weaker EU PMI data.  But obviously, US PMIs didn’t follow suit.  The services PMI is problematic for rates as it came in at the highest level in more than 2 years.

S&P Services PMI = 55.1 v s 53.7 f’cast,        [54.8 prev]

S&P Manufacturing PMI = 51.7 vs 51.0 f’cast,        [51.3 prev]

Hotter than expected PMI – coupled with Jobless Claims remaining near 10-month highs, is leading people to believe that the Fed’s inflation goal is not imminent.

Wall Street is also facing a quarterly episode ominously known as “triple witching” in which derivatives contracts tied to stocks, index options and futures are scheduled to mature — compelling traders en masse to roll over their existing positions or to start new ones. About $5.5 trillion are set to expire Friday, according to an estimate from options platform SpotGamma.

This morning featured an overnight rally driven by weakness in European PMI data and a logical sell-off following much stronger PMI data in the U.S.  Specifically, S&P Global’s Services PMI rose to the highest level in more than 2 years.  This is some of the earliest available data for the month of June and the burden of refutation is on incoming data that is week’s away (for instance, next week’s headline report, PCE, is still for the month of May). Today’s selling never got out of hand, however, and that meant the week as a whole was wholly uneventful in the bigger picture.

UMBS ended the day up 4 bps at 100.67