The Week Ahead: Postponed Data vs FOMC Minutes and Auction

- Government Shutdown means hardly any economic data from Federal agencies

- The Employment Situation (NFP) didn't come out last week, and bond markets stood still

- Treasury Auctions, FOMC Minutes, and several other reports are not affected

- Did we mention we'd really like to see the jobs report? 

Strategy

Uncertainty and paralysis were the themes that pervaded last week.  Those are likely to continue for bond markets as long as the shutdown persists.  In fact, the best case we can make for something other than paralysis is that such a prolonged period without meaningful movement would be "weird" (to use a technical term).  In other words, there's not much reason to retreat back to previous, weaker levels, nor is there reason to rally into better territory until the government is back online.

It's not that bond traders care too terribly much about the government, but they do care about economic data and Fed policy--quite a lot actually.  So the chain of events is: shutdown ends, economic data resumes, September Payrolls are released some days later, and bond markets can begin moving again. 

All that having been said, the current week holds more possibility for SOME movement in spite of the lack of data, because several pieces of unaffected data are important enough to matter.  Chief among those is the release of the Minutes from the most recent FOMC Meeting.  This isn't a new Fed policy announcement, but rather, the longer, more detailed account of what went on at the meeting that produced the September 18th "no taper" announcement.   Fed speakers and deductive reasoning have already told us most of what we need to know about this one (i.e. it was a close call), but it's still better than anything we had last week.

Charts

Longer term look at MBS.  Each candlestick is one day of trading.  Moral of the story: not only have prices been sideways in a tight range, but that range is perfectly in limbo, trading in better territory than the past 3.5 months, but worse territory than everything else (have to go back to March 2012 to find prices as low).

This was the long term 10yr Treasury chart from the beginning of last week.    With this wide a view, it doesn't look any different after last week, but if we zoom in, we can see the technical resistance continued to hold (see second chart below).

Zooming in now.  The white line in the chart below is the same as the white line in the chart above.  The red line in the chart above has been changed to daily candlesticks in order to show the resistance.  We'll probably need to be reunited with estranged economic data in order to convincingly break or bounce on this long term inflection point.

Note: the reports that would have been released this week are struck-through in this calendar.