MBS Day Ahead: Month/Quarter-End Considerations; Not Expecting Much From Data

It continues to be the case that economic data is guilty until proven innocent.  The crime?  Not being very relevant in terms of market movement compared to past precedent. 

This is no victimless crime either!  Those of us who watch the market are frustratingly deprived of the most logical of considerations.  Simply put, "stronger economy = higher rates" is super easy to understand.  While that may still be true in some abstract sense, it certainly hasn't been true if we use economic data as our benchmark of economic strength.  All that to say (yet again), that until something changes, data doesn't matter.  Perhaps it would be more accurate to say "other stuff" is having so much more of an impact than data that the latter has been rather inconsequential.

If that changes today, it would be a surprise as the reports are middle-of-the-road in terms of importance.  Chicago PMI is out at 9:45am and Consumer Confidence hits at 10am.  If these seem like they're moving markets, it's probably because the result is in line with the direction markets are moving anyway.

That direction will likely depend on month-end tradeflows where portfolio managers are forced to adjust their holdings to match a published index.  Some of these adjustments will have already taken place yesterday and possibly even late last week.  Not knowing how much is one of the things that makes month-end interesting.

Beyond that, Europe will be in the process of gearing up for Thursday's European Central Bank announcement and press conference, whatever that means.  Honorable mentions include ongoing political demonstrations in China, independence vote drama in Spain, and geopolitical risk.