MBS Day Ahead: In The Range, Counting The Days Until FOMC

After the March 18th FOMC Announcement, bond markets rallied.  10yr yields went from 2.05 to 1.90 on that Wednesday.  The following day, they sold off to an intraday high of 1.99.  Since then, 1.99 has been the most frequently-visited ceiling now that yesterday and Wednesday have both been added to the ranks. 

The technical ground-holding after Wednesday's rout helps build a sense of a narrow range persisting through to the Fed Announcement next week.  Even if it doesn't, the sideways range has persisted for more than a month already, and April still has the distinction of being one of the 3 flattest months of the past decade.

With threats to the range in mind, we've seen and increased willingness on the part of bond markets to respond to economic data.  Today brings the week's most potent offering in the form of Durable Goods.  Beyond that, there has also been an increased willingness to follow European markets, so that's something that we'll keep an eye on considering the more aggressive bounce underway in core European sovereigns (German Bunds in stunning electric purple below)

Apart from data, there's the ongoing behind-the-scenes input from the corporate bond market.  Friday is usually more negative when it comes to corporate bond influences as speculative traders try to get ahead of the forced selling they anticipate will be coming early in the following week.  The size and timing of yesterday's AT&T deal could throw cold water on the normal flow of events though.  If we see effects from that deal, it would be in the morning hours, competing with Germany and Durable Goods for market movement honors.