The recent Treasury market rally garnered more momentum overnight on speculation that China might announce a rate cut in the coming months due to weakening economic data. The 10-year yield touched 1.25% in early trading hours, the lowest since February, and equity futures are down nearly 1.5% ahead of the open. There have been multiple articles in the last 24 hours suggesting that investors are reversing on the reflation/inflation trade for various reasons, including the spread of the Delta variant. However, trader commentary suggests that the rally might be more technical than fundamental, driven by reduced Treasury supply and a relatively large amount of short positions prior to the rally (i.e., short squeeze).
In the MBS market, June prepayment data released late yesterday showed less than expected prepay activity, with Fannie Mae 30-year pool speeds rising 5% m/m to 24.6 CPR in aggregate. The 5% increase is considered a positive for investors in light of the 10% increase in business days for June relative to the prior month, and in a reversal of the last two prepay reports, prepayments from higher coupon pools accelerated at a slower pace than lower, production coupons.
Chief Investment Officer
|07/06/21||Markit US Services PMI||64.8||64.6||64.8||—|
|07/06/21||Markit US Composite PMI||—||63.7||63.9||—|
|07/06/21||ISM Services Index||63.5||60.1||64||—|
|07/07/21||MBA Mortgage Applications||—||-1.80%||-6.90%||—|
|07/07/21||JOLTS Job Openings||9325k||9209k||9286k||9193k|
|07/07/21||FOMC Meeting Minutes||—||—||—||—|
|07/08/21||Initial Jobless Claims||350k||373k||364k||371k|
|07/08/21||Langer Consumer Comfort||—||—||55.1||—|
|07/09/21||Bloomberg July United States Economic Survey|
|07/09/21||Wholesale Trade Sales MoM||—||—||0.80%||—|
|07/09/21||Wholesale Inventories MoM||1.10%||—||1.10%||—|
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