UMBS has opened down 6 bps.

Bonds were already leaking into slightly weaker territory ahead of the data and have popped to new highs afterward.  This report isn’t the biggest market mover, but this week’s installment is the one that lines up with the survey week for nonfarm payrolls.  As such, it tends to get some more attention.

Jobless Claims = 201k vs 218k f’cast. [213k prev]

Continued Claims = 1862k vs 1885k f’cast

Yesterday we got Fed Minutes.  Some highlights are

  • FED MINUTES: A COUPLE OF POLICYMAKERS POINTED TO DOWNSIDE RISKS FROM MAINTAINING AN OVERLY RESTRICTIVE STANCE FOR TOO LONG.
  • FED MINUTES: FED OFFICIALS JUDGED POLICY RATE LIKELY AT ITS PEAK FOR THIS CYCLE.
  • FED: SOME OFFICIALS SAW RISK INFLATION PROGRESS COULD STALL
  • FED MINUTES: MOST OFFICIALS NOTED RISKS OF CUTTING TOO QUICKLY
  • FED MINUTES: SOME POLICYMAKERS SAID SLOWING THE PACE OF BALANCE SHEET RUNOFF COULD HELP SMOOTH TRANSITION TO AMPLE LEVEL OF RESERVES, AND COULD ALLOW BALANCE SHEET RUNOFF TO CONTINUE FOR LONGER.

We had a lousy 20 year bond auction yesterday, which weighed on rates. Dealers were forced to buy 21.2% of the bond sale. The bid-to-cover ratio was a weak 2.39 compared to an average ratio of 2.63. The tail was 3.3 bps, the largest on record. Foreign investors turned up their noses at the issue, buying under 60% of the issue compared to 75% late last year.

Bonds only had a small reaction to the stronger Jobless Claims data, despite the reference period being the same as the next NFP number.  Traders were more interested in the lower price pressures reported in the S&P PMI data.  This suggests a certain level of receptiveness to some of the other 2nd tier data that may offer a counterpoint to the most recent CPI.  But that assumes the data is friendly in the first place.  Even if it proves to be friendly, we’re waiting at least a week for the first candidate (PCE next Thursday), and then another week beyond that before getting any top tier data.  In the meantime, bonds are in drift mode, and not the fun kind.

UMBS ended the day pretty flat – up 3 bps.

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