This is Matt Graham with the MBS Live Market Update. Last week brought a rare oasis in the desert of economic data created by the government shutdown. We just haven’t had the reports that would normally constitute big market movers for the bond market, but there was a bit of an exception last week due to a confluence of private label reports that had the power to create market movement. First off, when it comes to the first week of any given month. Even when we’re not in a government shutdown reports such as a DP employment and ISM non-manufacturing PMI already have a good amount of market movement potential, but during the shutdown, that is arguably amplified due to the absence of other data that could move the market. This was indeed the case last week with both a DP and ISM coming out on Wednesday. Both of them sang a similar tune, which was moderately stronger for the economy and bonds had a logical result. When it comes to a DP, there is a long and storied history between that metric and the non-farm payroll’s number. A lot of people like to criticize a DP as missing the mark when it comes to predicting what NFP will be. And arguably it does miss the mark on many occasions, but the bond market is nonetheless willing. To react to it. One benefit of a DP data is, it is. Generally more even keeled than NFP, but at present it is in existence unlike NFP. So the market will take what it can get, and in this case, what it got was a result of 42,000 new jobs created, which sounds pretty low at face value, but versus a 25,000 job for. It was stronger than expected. It also represented a move back into positive territory after last month’s negative 29,000 job print for a DP. That was at 8:15 AM Wednesday morning and it started bonds moving into weaker territory. The drama got a little bit worse after ISM non-manufacturing or ISM services. Well-respected report that has a strong potential to. Have influence on bonds. It came in at 52.4 versus 50.8, but the more interesting numbers were in the sub components where new auditors surged to 56.2 versus 51.0. And the prices paid component also rose to 78 from 68 last month. The employment component of that report gets some attention these days. Since employment is very much in focus when it comes to determining rate policy, and while it was still under 50 and technically in contractionary territory, it was a little bit less under 50 than expected at 48.2 versus 47.6. In other words, ISM was bad for bonds across the board yields. Subsequently moved to their highest levels of the week and nearly to their highest levels in a month. We’re four days short of claiming that dubious distinction, but nonetheless decisively weaker result of that data. The following day was completely different due to other reports, mainly a single report that you’ve probably never heard of from a firm called lio, which compiles an aggregated, synthesized payrolls number from a ton of other. Economic data and publicly available data. And in this case, LIO showed a decrease in monthly payrolls. And that was of course, at odds with what a DP said the day before. And it fuels fears that we could be seeing similar things in non-farm payrolls if we were to be receiving non-farm payrolls these days earlier in the morning and well before the scheduled release time. The firm Challenger Gray and Christmas reported its monthly layoff numbers. Some people would simply refer to this as the challenger job cut report highest levels in quite some time maybe ever, and 154,000 layoffs. Versus last month’s, 54,000. So definitely a big surge there in 2025 on track to be the third worst year after 2020 and 2009 for about the past 15 years. That didn’t have a huge impact overnight. It registered response for sure in terms of volume and volatility, but bonds quickly got back to the yields that were prevailing just before the data. So we would go ahead and place most of the importance on the lio. Report then on Friday. Consumer sentiment, much weaker than expected with some components of it at record, low levels, and that registered a response, which is something consumer sentiment doesn’t do reliably these days, but it did in this case, and essentially helped bond yields hold onto most of the recovery scene on Thursday, heading into the new week. The focus is clearly on the prospect for the government shutdown ending. There are a lot of optimistic headlines about the timeframe for that, but it should take several days, at the very least for the house to come back into session and work through voting on what the Senate was able to accomplish over the weekend. As for market implications, the shutdown is generally thought to be negative for the economy the longer it persists. So ending the shutdown has economically positive undertones, something that would arguably be. Be bad for the bond market, at least at the margins. It remains to be seen how it would actually play out, and it also remains to be seen what the schedule of economic data will turn out to be when the shutdown ends. It’s not the sort of thing where we’re gonna get a glut of all of the data that has gone missing during the shutdown timeframe. Some of the data will be difficult to collect in its normal fashion, and there will be an asterisk next to it. In terms of how the market views it from a movement potential standpoint, certainly the September jobs report will be able to be released almost instantly since it was pretty much ready to go right before the shutdown. But other than that, we will have to wait to hear from agencies on an updated release schedule and also on any idiosyncrasies that will impact the nature of that data collection and the associated releases. That’s gonna do it for this week. Back to you.
Matt Graham, Founder and CEO, MBS Live
Matt began as an originator in 2002. He fell in love with the idea of following MBS in real-time but felt that existing products were only scratching the surface. Thus was born MBS Live in 2007, the first-of-its-kind platform with real-time market data/analysis, and live chat with analysts, traders, and originators around the country. He is currently the Founder and CEO of MBS Live!
He’s been covering bond/mortgage markets, writing commentary, alerts, and chatting with the live community every business hour of every business day ever since.
Matt also serves as the Chief of Operations for mortgagenewsdaily.com, where he is one of the industry’s most respected mortgage rate experts, frequently quoted in the media. Mortgage News Daily’s rate index is used as the definitive resource on day-to-day mortgage rate averages.
He lives in the Pacific Northwest with his wife and son where he enjoys skiing, fishing, coaching youth sports, playing the guitar, and more DIY projects/hobbies than he’d care to admit.