MBS RECAP: Bond Markets Still Coming to Terms With Week's Losses

Bond markets continued to trade resiliently through the close today with the help of month-end buying demand.  A small-scale battle played out earlier this morning between those month-end buyers and the more tactical sellers looking to push yields higher to set up better entry points (i.e. push prices down in order to buy bonds later). 

These two classes of investors are often referred to as "real money" (pension funds, money managers, insurance funds, etc) and "fast money" (leveraged accounts, prop desks, hedge funds).  Real money is where month-end buying demand comes from and that buying clearly began after the 8:20am CME open when yields had been pushed up over 2.17.   It put a stop to the fast money selling that began roughly an hour earlier when yields were down at 2.146.  The two sides continued the battle in between those levels for the rest of the morning.  Month-end buyers were left in control in the afternoon as fast money left their algorithms to step in and sell any dip to 2.14. 

All things considered, it was a fairly uneventful day in light of yesterday's move.  We won't really know how much negative momentum still exists until next week with month-end out of the way.  Also, although bonds gained ground today, it was just a consolidation of the week's losses in the bigger picture.  The way traders react to next week's economic data will tell us a lot about the approach to December's Fed Announcement.  Specifically, WILL traders react very much, or is the key consideration simply that the Fed seems to be 'over' the global economic risks that stayed its hand in September (and merely giving us a courtesy warning as opposed to simply going ahead and hiking this week)?