The Week Ahead: Relatively Busy Week Of Data, Plus Treasury Auction And Month-End Trading

You name it and this week has more of it.  Compared to last week, which had very little by way of economic data, no Treasury auctions, and no major headlines or tradeflow considerations, the week ahead has a significant amount of economic data, a round of Treasury auctions, and the major tradeflow consideration of Month/Quarter-End. 

Last week's lack of data saw MBS tick faithfully higher in small increments on the first four days of the week before breaking quickly higher on Friday's "quadruple witching" session.  The gains on Friday left Fannie 3.0s--the coupon that a majority of conforming loans fall into--at all time highs by a wide margin over previous highs.  A full 7 days in a row of rate sheet gains has gone a long way toward dispelling fears that the last quarter of 2012 will shape up like the last quarter of 2010, when the previous iteration of the Fed's quantitative easing measures were announced. 

But just because we've logged more "up days" since the QE announcement than last time, doesn't mean we'd rest easy.  It will be interesting to see how trading levels this week react to a healthier dose of economic data as well as the fairly major structural event of month/quarter-end. 

The first part of the week is certainly the less intense, with Consumer Confidence being the only major piece of data.  There's a 2-year note auction on Tuesday, but considering the Fed has already glued down the short end of the yield curve until mid 2015, we'd continue to expect zero impact from short term auctions.  Durable Goods on Thursday and Incomes/Outlays on Friday anchor the week well, not to mention Friday being the last day to trade in September or the third quarter.

As so many Mondays are, today is more of a warm up before those bigger games.  There are items on the agenda, but nothing that has us on the edge of our seats.  Chicago Fed's National Activity Index leads off at 8:30 and the scheduled Fed Twist buyback from 10:15-11:00am is always a potential source of a small volatility.  San Francisco Fed Pres Williams will speak at 3:30pm.