MBS Day Ahead: Plenty of Data, but Will it Matter?

As is often the case on the week of Thanksgiving, the regularly-scheduled economic data continues apace, even if it must be crammed into fewer days than normal.  Apart from slight scheduling variations, the biggest question is whether or not the data will make much of a difference given the themes we've been discussing. 

Specifically, we've already seen plenty of evidence of liquidity considerations doing more to move markets than fundamental data itself.   That means prices and yields have been driven more by who's available to trade and what sorts of trading positions they're wanting or needing to open or close. 

You might incredulously wonder "sure, but there has to be a limit to how much control these so-called tradeflows can maintain if the economic data ends up being crazy enough."

You would be correct.  There is always some magical line in the sand beyond which, the data can move markets even on a week like this.  It's just that there is a high bar on weeks like this.

As for the reports that will try to ring this particular high-striker, we'll get a preliminary reading of Q3 GDP at 8:30am.  Keep in mind that "preliminary" is the 2nd reading for any given quarter ("advance" is the first and "final" is the--well... final).  In other words, we've already seen the first installment, which came in at 1.5 percent.  This installment is expected to bring that up to 2.1 percent.  Hitting that would keep the longer term chart in subsistence mode.

What about the morning's other key data release?  Consumer Confidence is definitely putting out some creepier vibes compared to other data due to its prominent cyclical variations.  By that, I mean big peaks and valleys are normal part of the series and highly visible when they happen--especially the valleys. 

As we look at the long term chart of confidence, it's worth wondering if this is among the empirical evidence that has the Fed so interested in hiking rates and now dropping hints that rates could get stuck at super low levels for a long time.  Reason being: the series has entered the same historical zone where the risks increase for that classic evaporation of confidence.  We know it will happen eventually.  And while it could take several years, the fact that it COULD take mere months could easily be contributing to the Fed's multiple personality disorder.