The Day Ahead: Approach to FOMC Minutes is Actually Fairly Uncomplicated

Yesterday

- Volume/Volatility increased for Treasuries, not so much for MBS

- Treasury volatility surrounded the 2 auctions (1-mo Bill and 3yr Note)

- 1-Mo T-Bills going crazy over debt ceiling.  Some influence on longer-term rates (NOT COMMON!)

- Rates rose a bit as MBS spent most of the day bouncing sideways under yesterday's lows

- Yellen gets nod as Fed Chief after hours.  Limited reaction in Treasuries

Today

- FOMC Minutes is the only big show in town--even then, not anticipated to be epic

- 10yr Treasury Auction can have a moderate impact

- Only other phenomenon to watch is the range.  Nighty night!

- Only other activity is to pondering how long rates can stay this flat

Strategy

These are not normal times.  While this could have been said at many points since the onset of the financial crisis, they're perhaps even more abnormal now.  Bond markets, especially, have a lot to juggle at the moment.  They would be doing whatever sort of job they'd do with respect to that juggling act, but instead are paralyzed (relatively) by a lack of data.  Most of the data has been postponed due to the government shutdown, but it is the Employment Situation above all others that we really need to see.  Problem is we don't know when we'll see it.

Could we really stay this sideways until then?  Even if we don't, the mere act of breaking out of this recent sideways confinement could be interesting in itself.  Actually, it could be an incidental break--the kind that doesn't really mean much and is soon trumped by the bigger gorillas in the room.  The gorillas most likely to do the trumping are the aforementioned jobs report and the FOMC Announcement at the end of the month.

Today, we'll have to make due with the meeting minutes from the last FOMC Announcement (the one where they held off on tapering).  Beyond that which was already shared in the statement back on Sep 18th as well as the various instances of Fed-speak between now and then, it's hard to imagine what sort of new information the Minutes would bring to light to fundamentally change the outlook.  After all, we know they were close to tapering and we know they didn't taper, but remain close depending on the economic data and Fiscal drag.  That's actually fairly uncomplicated. 

Then again, the Fed always reserves the right to surprise, so it still makes sense to stay tuned to prices at 2pm.  It might not hurt to tune in at 1pm as well, for the 10yr Treasury Auction.

Charts

Yesterday's mid-day glance at 1-month Treasury Bills

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