Mostly Sideways Even After Upbeat Data

Although bonds drifted into modestly weaker territory by the close, the damage was primarily a Treasury market affair. MBS, in contrast, held fairly steady--possibly reflecting GSE bond buying behind the scenes. Both of the key econ reports were stronger than expected (ADP employment and ISM services). Of the two, ISM was particularly balmy, coming in well above forecast and at the highest level since 2022. While it's possible that the lower inflation component of the ISM report helped offset the normal bond-bearish vibes, that's not a sufficient explanation for the yawn seen from bonds at 10am. With that, we're forced to rely on less satisfying explanations, such as a preoccupation with geopolitical developments.