Surprisingly Resilient After Stronger ISM Data
Wednesday’s key data point was the ISM Non-Manufacturing index. The ISM indices always have the power to move markets. Their relevance is arguably amplified at present as investors sift through cues regarding inflation and economic contraction. While the inflation component of the data was moving in the right direction, prices continued to rise. More importantly, the parts of the report that concern the health of the services sector were more than strong enough to justify brisk, additional selling pressure in the bond market. 10yr yields spiked almost 10bps in response and MBS lost almost half a point, but both managed to recover all of those losses and then some.
Econ Data / Events
ISM Services PMI
56.7 vs 53.5 f’cast
ISM Services ‘Activity’
59.9 vs 54.0 f’cast (highest since Jan)
ISM Prices Paid
72.3 vs 80.1 prev (lowest since Feb)
Market Movement Recap
09:02 AM Stronger in Asia, then weaker in Europe, largely in response to Spanish PMI data at 3:15am. Gradual selling continued into domestic hours with 10s now up 3.6bps at 2.787 and MBS down 6 ticks (.19).
10:13 AM Friendly lead-off ahead of ISM. Unfriendly selling spree since then. MBS and Treasuries both at weakest levels of the day. 10yr 2.823 and MBS down almost 3/8ths.
11:50 AM Slow steady progress after the ISM-driven sell-off. MBS near the day’s best levels with 4.0 coupons down only 2 ticks (0.06). 10yr back to 2.779 after being as high as 2.851.
01:04 PM Right in line with levels from the last update after briefly turning positive on the day. Bonds look like they might try to do it again shortly.