Bond Market Suffers as Investors Reallocate Funds into Riskier Assets
September 1, 2010 – 6:12 amPosted To: MBS Commentary
Stocks are rallying and the bond market is taking a beating after a much better than expected read on the manufacturing sector. The August ISM Manufacturing Index came in at 56.3 vs. economist estimates for a read of 53.0. The “Prices” index rose 4 points to 61.5 from 57.5, quelling deflationary fears and giving bond traders a reason to fade the rally. Stocks were up before 10am data but didn’t take flight until after ISM flashed. S&P futures are currently up 27 handles at 1075.25. The bull flattener is unwinding again. The 2s/10s curve is 9bps steeper at 209bps. The long bond is 14.7bps higher at 3.668%. The 7-year note is +12.5bps at 2.046%. The 10yr note is +12.3bps at 2.593%. Volume was heavy into the downtrade. Although production MBS coupons are performing much better than their benchmark…(read more)