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Curve Watchers Anonymous notes that treasury yields surged higher and mortgage backed securities (MBS) had a steep selloff following purportedly good job numbers.
Beneath the surface, the economy actually shed 326,000 full-time jobs.
In the short-term what matters is the reaction, so let's take a look at how treasury yields reacted to the news.
$TNX: 10-Year Treasury Yield
Yield on the 10-year treasury note is up 21.8 basis points to 2.719%. The yield is up 110 basis points (1.1 percentage points) since the May low of 1.614%.
$TYX: 30-Year Treasury Yield
Yield on the 30-year long bond is up 18.2 basis points on the day to 3.679%. The yield is up 86.9 basis points since the May low of 2.81%.
$FVX: 5-Year Treasury Yield
Yield on the 5-year treasury note is up 18.6 basis points on the day to 1.86%. The yield is up 95.7 basis points since the May low of .641%.
click on chart for sharper image
Charts were captured at slightly different times (minutes apart) so yields on two sets of charts do not match precisely.
- $TYX - Green: 30-Year
- $TNX - Orange: 10-Year
- $FVX - Blue: 5-Year
- $IRX - Brown: 3-Month
Yields have generally been rising since mid-2012 and have blasted higher since May-2013.
A 1.1 percentage point rise on treasures will have a significant impact on housing.
Mortgage Backed Securities Clobbered
Michael Becker at WCS Funding Group says today is one of the worst selloffs in mortgage backed securities (MBS) that he has ever seen.
For example a 30-year FHA loan that Becker placed on Tuesday at 4 1/8% would be 4 3/4% today.
The Fed is probably having a conniption-fit over these reactions. Expect the Fed to come out in full-force again, with repeated attempts to talk rates down.
Mike "Mish" Shedlock