http://globaleconomicanalysis.blogspot.com/2013/07/mbs-clobbered-and-treasury-yields-soar.html

( The bond gurus must be bleeding from their eyes after this past week , especially Friday ! )

Friday, July 05, 2013 2:26 PM

MBS Clobbered and Treasury Yields Soar Following Purportedly Good Job Numbers

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%.

Historical Perspective

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.

Legend

$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

Stocks Melt-Up As Bond Yields Spike Most In 2 Years

Submitted by Tyler Durden on 07/05/2013 16:16 -0400

Bond

Copper

NASDAQ

The market remains confused. The better-than-expected headline jobs data prompted USD strength (Taper-on), gold/silver weakness (Taper-on), Homebuilder stocks drop (Taper-on), Bond yields surge (Taper-on), and credit market widening (Taper-on); but the good-old trusty US equity market was not having any of that. After dumping 25 points from its post-NFP highs, S&P 500 futures gapped and jerked up to VWAP, ran stops at the highs of the day, dropped back to VWAP, then surged into the close. The Dow ended up 150 points. Treasury yields rose the most in 2 years - an impressive 22bps. Despite a late surge, high-yield bonds had their worst day in 2 weeks. Gold and silver down 2.3% and 3.5% respectively and copper dumped 3.2% (not exactly the growth-exhibiting factor that everyone suggests is driving stocks up and bonds down). Meanwhile,WTI topped $103 for its highest close in 14 months.

A 'well-supported' rally in the markets...

The S&P closed above its 50DMA for the first time in 2 weeks... with the best 8-day run since the start of the year - and it looks like (for cash markets) this fills the post-FOMC gap...

and the NASDAQ (thanks to AAPL's great week and today's loss) is now above FOMC levels...

Treasuries were battered... closing at their high yields of the day with 7Y underperforming +26bps on the week.

Spot the odd market out... (credit was not playing along with stocks)

But the late-day 330Ramp Capital driven idiocy was insane... with plunging volume

Homebuilders did it again (though managed to rally along with the market from early lows) and Discretionary laughs in the face of a Taper...

WTI surges 7% and above $103, gold and silver hurt as the USD rips and Copper ignoring the growth meme...

Charts: Bloomberg and Capital Context

Bonus Chart: Gold and AAPL continue their dance...

Obamacare Strikes: Part-Time Jobs Surge To All Time High; Full-Time Jobs Plunge By 240,000

Submitted by Tyler Durden on 07/05/2013 - 09:13

As a reminder: jobs have quantity and quality components. The quantity component was good enough to convince the 10 Year the taper is imminent (if not stocks, which continue to trade dislocated from any and all fundamentals). But how about the quality? In a word: not good. In June, the household survey reported thatpart-time jobs soared by 360,000 to 28,059,000 - an all time record high. Full time jobs? Down 240,000. And there is your jobs "quality" leading to today's market euphoria (if only for now).

The Market's Schizophrenic Reaction To Payrolls

Submitted by Tyler Durden on 07/05/2013 - 08:50

UPDATE: S&P futures collapsing quickly - now down from Payrolls

The initial kneejerk reaction in stocks was oddly 'good-is-good' higher after the better-than-expected headline data on payrolls - which perhaps signalled that Taper is nearer - but FX, bond, and precious metals markets were clearly in Taper-On mode. Treasury yields cracked 13bps higher, Gold and Silver dropped 1-2%, outdates for Eurodollar futures dropped notably, and the USD jumped around 0.5% almost uniformly. As an illiquid equity market soaks in the reality, some of that initial surge is fading...

June Payrolls +195K Much Higher Than Expected; Underemployment Rate Soars To 14.3%

Submitted by Tyler Durden on 07/05/2013 08:35 -0400

Gambling

Unemployment

So much for any doubts about a September taper: with the street expecting a 165K NFP number for June, the actual print of 195K following an upward revised May print of 195K as well, means the September flow fade is now virtually assured. The Unemployment Rate stayed at 7.6% despite expectations of a drop to 7.5%, although the real action was in the underemployment rate which exploded from 13.8% to 14.3%.

From the report:

Total nonfarm payroll employment increased by 195,000 in June, in line with the average monthly gain of 182,000 over the prior 12 months. In June, job growth occurred in leisure and hospitality, professional and business services, retail trade, health care, and financial activities. (See table B-1.)

Leisure and hospital ity added 75,000 jobs in June. Monthly job growth in this industry has averaged 55,000 thus far in 2013, almost twice the average gain of 30,000 per month in 2012. Within leisure and hospitality, employment in food services and drinking places continued to expand, increasing by 52,000 in June. Employment in the amusements, gambling, and recreation industry also continued to trend up in June (+19,000).

Employment in professional and business services rose by 53,000 in June. Job gains occurred in management and technical consulting services (+8,000) and in computer systems design and related services (+7,000). Employment continued to trend up in temporary help services (+10,000). Over the past year, professional and business services has added 624,000 jobs.

Retail trade employment increased by 37,000 in June. Within retail trade, employment increased by 9,000 in building material and garden supply stores and by 8,000 in motor vehicle and parts dealers. Employment in wholesale trade continued to trend up (+11,000).

Health care continued to add jobs in June, with a gain of 20,000. Within the industry, employment continued to trend up in ambulatory health care services (+13,000). A gain of 5,000 jobs in hospitals followed a loss of 8,000 jobs in May.

Employment in financial activities rose by 17,000 in June, with most of the increase occurring in credit intermediation (+6,000) and in insurance carriers and related activities (+6,000).

Federal government employment continued to trend down in June (-5,000) and has declined by 65,000 over the past 12 months.

Employment in most other major industries, including mining and logging, construction, manufacturing, and transportation and warehousing, showed little change in June.

The average workweek for all employees on private nonfarm payrolls was unchanged in June at 34.5 hours. In manufacturing, the workweek increased by 0.1 hour to 40.9 hours, and overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours. (See tables B-2 and B-7.)

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $24.01. Over the year, average hourly earnings have risen by 51 cents, or 2.2 percent. In June, average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $20.14. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for April was revised from +149,000 to +199,000, and the change for May was revised from +175,000 to +195,000. With these revisions, employment gains in April and May combined were 70,000 higher than previously reported.

More shortly.