MBS Day Ahead: ECB Detailing QE Today; NFP Tomorrow; Plenty for Bonds to Consider

When the ECB (European Central Bank) officially announced quantitative easing in January, they were pretty light on the details.  At least that's true relative to what markets have come to expect based the ECB's previous programs.  To say they're complex is an understatement.  Things are simply more complicated when one central bank is balancing the economic and political interests of 19 countries, some of whom wholeheartedly disagree on the best path forward.

That complexity and disagreement is part of the reason it's taken ECB President Mario Draghi as long as it has to get a more western style of QE on the table.  But even then, it's not as simple as it is for the Fed, which can simply say "here's what we're buying and how much."  To be sure, the ECB will effectively also be saying what they'll buy and how much, but the way they go about it is where things get trickier. 

Bottom line: just the initial highlights of the ECB's QE program were already vastly more complicated than US QE.  Now today, they will basically be adding confusion to more confusion.  It's not the sort of thing that's nice and tidy like an NFP headline.  It will take markets time and effort to digest bigger picture implications, and the conclusions might change several times throughout the course of the morning.

This could be a very big deal for bond markets, or it could be a total dud.  The only major risk is core European bond markets finding reason to view it negatively.  If German Bunds break higher from their sideways trend, US Treasuries would have less of a problem breaking above February's highs.  That said, Treasuries (and by extension, MBS and mortgage rates) have clearly been willing to march to their own beat recently, and in a bad way.  So perhaps all it would take would be a big NFP miss for US bond markets to shrug off any European bond market volatility seen today.