Bonds were already quite a bit weaker in the overnight session as global markets gradually added to the selling spree seen yesterday.  When the sub 200k jobless claims headline hit just now, the initial reaction was a quick bump toward slightly higher yields, but it was quickly erased.  This is odd, but it could have to do with the fact that yields hit 4.983 an hour earlier and were having a technical bounce regardless of data.

Traders could also be thinking more about the steady uptick in continued claims, now over 1700k for the past 2 weeks.

Jobless Claims = 198k vs 212k f’cast  [211k prev]

Continued Claims = 1734k vs 1710k f’cast  [1705k prev]

Philly Fed Index = -9 vs -6.4 f’cast [-13.5 prev]

Yields are now a few bps lower than pre data levels, with UMBS down 25 bps on the day.  S&P futures up 8.25 after the first hour.

Jerome Powell is set to speak today at noon EST. Here is a preview of what to expect. Higher for longer is expected to be the message, along with the surprising strength of the US economy, especially in the labor market and consumer spending.

Existing home sales fell 2% in September to a seasonally adjusted annual rate of 3.96 million, according to NAR. This is down 15.4% from a year ago.   The percentage of first time homebuyers fell to 27%, which is super-low. The first time homebuyer typically accounts for around 40% in a normal market. Investor home purchases increased.

The LEI for the US fell again in September, marking a year and a half of consecutive monthly declines since April 2022.   In September, negative or flat contributions from nine of the index’s ten components more than offset fewer initial claims for unemployment insurance. Although the six-month growth rate in the LEI is somewhat less negative, and the recession signal did not sound, it still signals risk of economic weakness ahead. So far, the US economy has shown considerable resilience despite pressures from rising interest rates and high inflation. Nonetheless, The Conference Board forecasts that this trend will not be sustained for much longer, and a shallow recession is likely in the first half of 2024.”

At first glance, it makes perfect sense to see the bond market in weaker territory after Jobless Claims came in a 198k vs 212k f’cast.  After all, this is the claims data that lines up with NFP survey week (the big jobs report number that will come out in early Nov).  But oddly enough, bonds temporarily improved after the data came out.  Weird stuff… Is it the modest uptick in continued claims?  Or did bond buyers finally perk up with 10yr yields near 5%?  Either way, after the afternoon’s Powell comments, traders bought 2s and sold 10s amid another lurch of “higher for longer” capitulation.

UMBS closed down 27 bps on the day at 96.52

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