The Day Ahead: Slightly More on Tap as Bond Markets Search for Guidance

Bond markets may not be searching for guidance as much as they're waiting for guidance.  That "waiting" was evident on Monday where, for lack of a more elegant way to put it, nothing really happened.  While it's heartening to see a second session with green on the screens, MBS were essentially unchanged from the first trades of the day.  Flatter still were Treasuries, which actually crept back into Friday's range early in the day and held in a sideways, even if choppy pattern, through the close.  There too, there are heartening undertones, such as the ground held at the 1.916 ceiling in 10yr yields, but such heartening anecdotes are at least balanced out by the lack of directionality and volume.  It was simply a quiet day.Perhaps a bit too quiet...

There's a rather anemic effort at creating more noise on the part of the day's scheduled events on Tuesday.  Apart from a few sentiment surveys in the morning, there's also scheduled Fed "Twist" buying in the 6-7 year range.  We're not holding our breath for that one as Monday's 30yr buyback did little to shake things up, and it should have considering it was the only thing that stood out on the calendar (again, the calmness was perhaps a bit overdone).

Tuesday also sees the afternoon events start to pick up with the first of the week's Treasury Auctions.  Results for the auction of $32 biillion in 3yr Notes will be released at 1pm and we're curious to see if things begin to change in light of last week's Fed's minutes, with respect to 3yr Auctions being even remotely relevant to broader bond market momentum or of they'll simply continue to be a matter of housekeeping with no discernible impact on MBS prices.  At 3pm, we get both the Consumer Credit report for November (not all that interesting), as well as a speech from Richmond Fed's Lacker (a 2012 voter, and perhaps able to offer the week's first installment of clarity on the recent FOMC minutes.  Then again, Lacker is quite an open book when it comes to his monetary policy views, and the perennial dissenting voter in recent Fed meetings).