MBS Day Ahead: Probably a Quiet Friday, but With Potential Quarter-End Trading Considerations

The actual end of the quarter isn't until Monday, but it's not uncommon for market participants to get end-of-quarter (or end-of-month for that matter) trading needs out of the way earlier if opportunities present themselves. 

In the current case, we've probably already seen some quarter end flows coming out of stocks and into bonds.  Indeed, this in line with some of the 'stock lever' connection this week (where bond yields have fallen in concert with stock prices even when fundamental justifications weren't readily available. 

There's never any way to know how much positivity or negativity end-of-period tradeflows will account for.  The best we can hope for is that there's more bond-buying/stock-selling left to be done.  Beyond that, we can simply know that momentum COULD show up in either direction for no apparent reason.

From a technical perspective, the bond rally remains intact, but has been so well-behaved so far that it's already almost ripe enough for it's first correction.  There's still some green on the banana, but it wouldn't be a shock to see it get eaten (i.e. still room to run for bonds, but that's less obviously the case today compared to yesterday).

Beyond the tradeflow considerations and a 9:55am Consumer Sentiment Report that probably won't matter, the day is pretty quiet and accounts are more likely to gear up for next week's early close and Thursday NFP appearance.