The Day Ahead: Abbreviated Data-Free Session

Wednesday

- Stronger than expected Jobless Claims, Chicago PMI, and Sentiment all weighed on bond markets

- Light volume and participation made it easier for prices to be pushed around

- There was potential resistance regardless of data (see charts here)

- Can't assume weakness is purely holiday-related (read more...)

Today

- Nothing significant on the calendar

- Bond markets close early at 2pm ET

- Officially the last trading day of the month (possibly supportive)

- But much of the month-end buying probably already seen

Strategy

It's not at all likely that today's half-day will be able to do anything to inform Wednesday's weak session for better or worse.  Any strength can be discounted as month-end buying (portfolio managers being forced to buy a certain amount of Treasuries and/or MBS in order to align their portfolios to various benchmarks).  Any weakness can be discounted as light holiday volume.   Any way you look at it, we're waiting until Monday before we have meatier data and participation.  At that time, we can begin to assess how much of Wednesday's weakness was heartfelt and how much was a holiday head-fake.