The Day Ahead: One More Data-Free Day Before FOMC Announcement

Monday saw a fairly standard-issue "inside day" for bond the two securities we follow most closely: Production MBS (for mortgage rate implications) and 10yr Treasuries (for broader bond market trends).  In both cases, prices and/or yields traded INSIDE the highs and lows from Friday's session.  This generally occurs either on slow, uneventful trading days or when markets are eagerly anticipating some big event and unwilling to commit too much to a move in either direction.  Sometimes, both of those factors are in play and this could be one of those times. 

On one hand, things were simply slow yesterday in bond markets, but we couldn't rule out that some of the containment is with an anticipatory eye on Wednesday's FOMC Announcement.  We might also grudgingly entertain the possibility that the presidential debate could factor into the sideways grind (acknowledging an election as a bond market consideration is a first for us, at least when it comes to domestic elections), but we're not really pleased with that assessment (and never have been) as much as we're simply rattling off another possibility.  

Today's offering of data and events isn't much better than yesterday's, with only the relatively inconsequential Richmond Fed Manufacturing Index at 10:00am and the completely inconsequential 2yr Treasury Auction at 1pm.  There's no scheduled Fed "Twist" buying from 10:15-11:00am because there is, in fact, "Twist Selling" of  2.5-3yr Treasuries.  When we're talking about maturities that short in an era where the ongoing FOMC verbiage conveys "low rates through mid 2015," such things are of little consequence to broader bond market movements.  As such, it's another day without guidance, but it should be interesting to see whether bond markets keep following stocks or if they diverge into some sort of pre-FOMC trading pattern with Wednesday's Fed announcement looming.