The Day Ahead: Syria, Treasury Auction, and Pending Sales

The mid-point of the week is acceptably plagued by uncertainty.  We can't really be sure which of the events on tap will have the largest impact, largely because trading conditions remain thin and the "geopolitical risk trade" (where stock prices and bond yields move in unison--higher for less risk, lower for more) can't be pinned down to calendar releases.  It's done bond markets quite a favor already--at least to whatever extent thin trading in technically logical patterns is actually attributable to Syria.

The point is that IF turmoil in Syria is to have any meaningful, lasting impact on bond markets, we haven't seen it yet, and it would still remain to be seen if next week's NFP wouldn't have something else to say.  Right now, it's the flavor of the month. 

Even in their tepid volumes and liquidity, bond markets have been loathe to trade these headlines as much as other markets.  That continued to be the case yesterday, but other markets ostensibly traded them so much, that it made little sense for bond markets to weaken on Consumer Confidence data that wasn't too terribly better than expected so shortly after hitting 2yr+ high yields last week and bouncing back on some much more alarming data.  10yr yields returned precisely to their 5yr moving average (all past breaks have meant at least a few months at higher yields)

Last week's alarming data was the Census Bureau's New Home Sales report, which came in so much weaker than expected that even the report's characteristically spastic standard error doesn't quite cut it--especially not with downward revisions to previous months.  Bottom line--and this may come as a shock--rising rates may be affecting housing and housing data may finally be showing it enough to matter (it's shown up already for sure, but not in as grand a fashion).

Today's Pending Home Sales data offers another chance for it to show up, sort of.  On the one hand, this report is designed to mimic the "New Home Sales" data we had last week.  On the other hand, it's been pretty lousy at it (last week's data at the bottom, today's soon-to-be released Pending Home Sales is second from the top, just under the NAHB Housing Market Index, incidentally and randomly assigned that nice rose color).

That data is at 10am with MBA's Mortgage Market Index showing up 3 hours earlier with a preview.  MBA Purchase Apps tended to track quite well with NAR's data in the past and has been much more correlated with the Census Bureau data lately.