MBS MID-DAY: Chart Shows (Lack of) Impact From Shutdown

MBS Pricing Snapshot

From the BEA (reports GDP)

"As a federal agency, the Bureau of Economic Analysis (BEA), like all other U.S. government entities, is required to suspend its operations until Congress appropriates funding for this fiscal year. This suspension will include the release of economic indicators and other information that may be scheduled during the duration of the shutdown. Additionally, the Bureau’s Web site will be inaccessible during the suspension. When the agency receives funding to resume normal business operations, it will resume production and release of its scheduled economic statistics. If the shutdown results in the postponement of any indicators, a new release schedule will be issued as soon as possible."

Special notice from the BLS (key report: Employment Situation):

"This website is currently not being updated due to the suspension of Federal government services. The last update to the site was Monday, September 30. During the shutdown period BLS will not collect data, issue reports, or respond to public inquiries. Updates to the site will start again when the Federal government resumes operations. Revised schedules will be issued as they become available."

Not that market participants were expecting any explosions when the shutdown countdown reached 00:00, but it wouldn't have been unreasonable to expect at least a modest reaction. Instead we're left with essentially nothing.

Volume and volatility were somewhat elevated overnight, but when we step back from these trading levels and look at them in the context of the past few weeks, they will be very hard to identify as having correlated to any significant event. It's sad in a way--that this is the visual representation of all the seemingly high drama.

Overnight markets saw limited movement for stocks and modest weakness for bonds. 10 yr yields never went higher than the overnight highs from Friday (2.67), and even look to have hit support at overnight levels from last Thursday (2.66). Bonds are weaker for sure but rally momentum has been dying down for several days. We may well have seen a similar pull back regardless of shutdown developments.

MBS opened up significantly weaker, but the first few ticks of the day should be ignored. Liquidity didn't come online until Fannie 3.5s were within striking distance of yesterday's range. They're now 5 ticks higher than the first real trades of the day at 101-23, though this is still 6 ticks weaker than yesterday's latest levels.

The Construction Spending report that had been scheduled for 10am is now indefinitely delayed due to the shutdown, but the ISM report remains on schedule.