MBS RECAP: Bonds Shy Away From PM Swoon to Hold Solid Gains

The most important thing to understand about today's market movements is that by writing this sentence (or reading it, in your case), we've already given them more attention than they deserve.  It was an excruciatingly slow trading session, both in terms of volume and participation.  Any traders that stepped up to the plate with any level of conviction were able to move markets.  Even then, trading levels held inside the range established on Thursday and Friday of last week, effectively continuing to consolidate ahead of this week's FOMC events on Wednesday.

All that having been said, the morning's economic data did seem to give overnight positivity a bit of a push.  This was especially true of the Industrial Production numbers which were not only weaker than expected for today's release, but also negatively revised for the previous release. 

A good amount of the buying demand in bonds obviously wanted in the afternoon hours.  The fact that this lined up with European markets closing is probably not a coincidence, but trading was so thin in general that we can't rule out other, more serendipitous possibilities.  For all we know, the tumbleweeds rolling across trade desks could have just hit the sell button on accident a few more times.  Whatever the case may be, the selling was brief and bonds bounced back by the close, holding on to most of the day's gains in the process.