MBS down 45 bps on the day. Stocks down 11.3 points as well. A lose-lose

Bonds were already several bps into negative territory to start the day but are adding to the losses after the lower Jobless Claims number. This particular instance of claims is the one that lines up with the survey week for nonfarm payrolls.

Jobless Claims = 228k vs 242k f’cast [237k prev]

Philly Fed = -13.5 vs -10 f’cast [-13.7 prev]

Bonds continued selling in fits and starts with investors fleeing both sides of the market (stocks at lows as well). 10yr yields are up almost 10bps at 3.844.

Existing Home Sales fell 3.3% in June, according to NAR. The market can easily absorb a doubling of inventory….Home sales fell but home prices have held firm in most parts of the country. Yet permits and starts are down – as is Builder sentiment. Lame

Days on market rose to 18 from 14 a year ago, while all-cash buyers accounted for 26% of sales. Investor activity increased to 18%. The first time homebuyer was 27%.

The Index of Leading Economic Indicators fell again in June, according to the Conference Board. The US LEI fell again in June, fueled by gloomier consumer expectations, weaker new orders, an increased number of initial claims for unemployment, and a reduction in housing construction

The stock market is signaling a soft landing, but the bond market is unequivocally predicting a recession. Similarly, manufacturing has been in recession for close to a year, but services are doing fine. Lastly, hard economic data such as construction activity and car manufacturing are improving while sentiment surveys of consumers and small business are very weak. Leading economic indicators are dismal. I still see a mild recession.

Bonds began the day in weaker territory but up until the AM econ data, yields were no higher than yesterday’s highs.  After data, it was off to the races for sellers, but not in a straight line.  Jobless Claims data was the big issue as it came in much lower than expected and on NFP survey week to boot.  The implication is a higher risk of a big NFP number in 2 weeks.  Bonds progressively traded that in, but weren’t exactly sure how to go about it given the state of flux for the Fed’s rate hike outlook after the most recent CPI data.  Looked at another way, CPI argued for a softer stance from the Fed next week whereas today’s data says “not too soft, Jerome!”

At the close, MBS were down 36 bps.   Stocks lost 30 points