Plenty Of Volatility In Treasuries. MBS Stable in Sideways Trend Channel

    * Fannie 4.5's unchanged on the day at 100-14
    * 10yr Treasury 4 ticks worse in price, bringing yield to 3.867
    * 3.867 also important technical level for the 10yr (see teal line in tsy chart below)
    * Stocks higher, in narrow range, finding resistance from 3/23 closing high (again)
    * Census Jobs already baking in NFP Discount?

Starting with treasuries, we've thankfully eluded the peakier yields from Friday as the 10yr has largely held under 3.887.  But an AM rally was firmly erased from our imagination when Friday's low yields provided FIRM resistance at 3.847.  And those two yields have been the range starting at 10am on Friday, with the 3.867 level mentioned above being the midpoint, and definitely showing a tendency to give yields a bit of pause before marching straight through.

MBS are a bit less exciting, as one almost gets the sense that spreads--apart from the fact that they tend to tighten when treasuries are selling anyway--are enjoying Fed buying for the few more days it's around.  The range is more narrow, higher, and with more rapidly declining volatility.  There seems to be a clearly established range over the past two days between 100-10 and 100-16 (very narrow!  so narrow in fact that it very likely will not last through NFP).

Stocks, meanwhile, find themselves now contending with 1174 in the S&P for a 2nd day.  Since I started writing, they're already inching back up that direction looking for another test.  To me, 1174 seems like the gate that will be flung wide open if NFP is bullish.  But that's just today's read.  A lot can happen between now and Friday.  Oh, and I suppose it bears mentioning that although the gate will be open, stocks wouldn't go anywhere since they're not trading on Friday.

Speaking of Friday, we're hearing quite a few questions about census jobs distorting Friday's NFP number.  Here's the thing though...  If we already know that temporary census hiring accounts for 150k in the jobs report, that is necessarily already included in the consensus numbers.  Additionally, there is another bit of discount of Friday's number as the weather-related weakness in February's report is also getting baked back in to the cake.  Because of these two discounts (census hiring and weather weakness last month), it feels like a pretty average NFP headline would actually be read as a bit weaker than average.  And that could be good for bonds.

If you didn't read the last post, AQ provided some lock/float guidance regarding the end of the Fed's MBS Purchase Program. READ MORE