MBS Day Ahead: Data Matters, But So Does Europe

Tuesday morning wasted no time in confirming the relevance of economic data to the current bond market environment.  When Chicago PMI came out weaker than expected (and with components that suggested a bleaker labor market picture on “jobs week”), bonds immediately responded with a decent little rally into positive territory.  Less than an hour later, we’re moving back into negative territory as European tapering concerns continue to mount.

European central bank decisions were already in focus in the overnight session.  They were the key culprit behind moderate weakness…