MBS Day Ahead: Risk of Boredom Ahead of Next Week's FOMC

This probably won't be the last time I mention it before next Wednesday, but next Wednesday is the FOMC Announcement.  That's the one where Yellen said the Fed would call an impromptu press conference in the event the Fed deigned to hike in October. 

The Fed, of course, will not hike in October and the consensus has now pushed well into 2016.  But there still is enough of a chance that Fed hikes in December to take it seriously.  Because of that, October becomes the meeting where we may find out whether or not the December hike is coming.  There would be a surprising degree of certainty due to the Fed's propensity to embed clues in the Announcements because they've been unhealthily obsessed with attempts to avoid stirring the proverbial pot.

But that's next week and this is this week.  More's the pity because this week is already consolidating in that classic pattern often seen in the run up to big data/events.  Trading ranges have already grown quite narrow and it would take a concerted effort to remain this flat for an entire week.  In fact, it probably won't happen (simply because markets never stay that flat for that long, even if they come close).  As such, we know that "something's gotta give" before next Wednesday.  The only question is what.

With a sparse data calendar this week, the key releases on any given morning stand as good a chance as anything to set the tone.  Today's only top tier data is Housing Starts at 8:30am.  Starts themselves, are expected to rise to 1.15 million from 1.126 million (annual pace) and Permits are seen edging just slightly higher to 1.164 million from 1.161 million last month.

If the data doesn't get the job done, Fed speakers might.  Dudley is up at 9am and Yellen herself takes the mic at 11am.  It's passe to say "nothing they say could be a surprise."  They've consistently been somewhat surprising if for no other reason than their story keeps changing (not much, mind you, but it does seem like there's been a ideological 'flavor of the week' when it comes to how the Fed is viewing rate hike prospects).