MBS Day Ahead: Aimless Week, Downbeat Home Sales Forecast, and Technical Silver Lining

The first two days back from the extended weekend have been surprisingly uneventful, and that's saying something considering they were already likely to be fairly quiet.  There hasn't been much by way of potential market movers so far and if yesterday's Existing Home Sales data had a chance, it blew it by coming in right on top of forecasts and with negligible revisions.

Today brings the government version with the New Home Sales set for 10am and expected to come in at similarly tepid levels.

The only other potential market mover on the calendar is the afternoon's 5yr Treasury Auction at 1pm.  Unlike yesterday's 2yr auction, this one is more relevant to the area of the yield curve that speaks to MBS.  Moreover, 5's are the 2nd most traded Treasuries next to 10's, so if the auction deviates greatly from recent norms and expected results, MBS might feel it.

Other market moving considerations exist, but don't necessarily adhere to a calendar.  As earnings season continues, big moves in stocks still have the potential to help or hurt.  Ebbs and flows from the corporate bond market (big companies issuing investment grade debt) can also create volatility, but there will never be any overt confirmation when and how that's happening.  It can only be guessed at deductively.

On a final note for today, the technical picture is getting interesting right now.   As of Thursday, Treasury yields are officially trending perfectly sideways since February 3rd (which can be viewed as the end of the "new year adjustment/correction" for bond markets).  They've held perfectly sideways since then.  The chart below shows a simple linear regression from Feb 3 (equal instances of yields above and below the middle line).  This bespeaks the overall flat range between 2.6 and 2.8, but is slightly more constructive (as the previous caveat was "sideways to slightly higher in rate."  Now it's just sideways).