UMBS opened down 15 bps in the first hour of trading.  S&P Futured up 13.75
Bonds began the day in slightly weaker territory and continued selling–somewhat abruptly–at the 8:20am CME open.  There continue to be few satisfying scapegoats apart from month-end/new-month tradeflows, but there are some connections to be drawn to European politics, Japanese Yen turmoil, and perhaps even implications of a shifting U.S. political narrative.

Almost every single component of the ISM data was weaker than the previous report.  Despite that, and despite an initial rally, the bond market is actually slightly weaker than in the moments leading up to the data.

ISM Manufacturing = 48.5  vs 49.1 f’cast,   [48.7 prev]

ISM Prices Paid = 52.1 vs 55.9 f’cast,     [57.0 prev]

The rise in bond yields on Friday was puzzling because the PCE inflation indices were benign and came in as expected. Bond yields briefly touched 4.27% an hour after the report before working their way higher to 4.4%. Not sure what the catalyst was – could have been end-of-month / quarter adjustments – but yields are higher this morning.

The week ahead will be dominated by the jobs report on Friday. Jerome Powell will be speaking on Tuesday

Often, if not most of the time, one can observe the core ingredients of any given trading day and reasonably predict the nature of the bond market’s reaction.  At the very least, there’s a certain basic level of causality that tends to play by the rules more often than not.  For instance, if a report like ISM Manufacturing comes in weaker across the board, it’s reasonable to expect bond yields to fall, all other things being equal.

To be fair, that actually happened today, but only for about 70 seconds before yields began selling off again, ultimately hitting the highest levels in more than a month.  Such a counterintuitive move sends analysts scurrying for narratives to fit the market movement.  In this case, all we have are the now familiar month-end/new-month trading patterns and “politics.” The latter is a can of worms–not because of the charged nature of the topic, but because of all the ifs, thens, assumptions, and yeah buts required to to make the narrative fit.

UMBS are down 20 bps on the day, at 99.97