MBS Day Ahead: 2 Days Left For Potential Pre-Fed Craziness

Labor Day deserves its name on Wall Street and in Washington.  It's hard to explain, but there's definitely some sense of "getting back to business" after Labor Day.  Summertime trading themes are already waning, but the second week in September marks the official change of gears.  As such, it could be the case that the lack of volatility seen so far this week is merely a product of pre-Labor-Day apathy, but it makes sense to stay on guard.

At the risk of repeating the same old thesis, we just had a high degree of emphasis placed on the 2 weeks of data leading up to the Fed meeting in the middle of the month.  At issue: Fed's Fischer's comments about these 2 weeks having a bearing on whether the Fed hikes now vs later.  Presumably, strong enough data means they hike now, and unequivocally, Friday's data is the most important of these 2 weeks.

While NFP can always result in an underwhelming flatness, it makes sense to give this one a wide berth in terms of how much it could move markets.  It's less clear where that leaves today's data (basically, ISM Non-Manufacturing, as far as the relevant stuff goes).  The narrowness of the trading range so far this week might suggest that markets are only tuning in for NFP Friday, in terms of "big movement potential."  If that's not the case, we should know shortly after 10am today.