MBS Morning: With 1 Day Left, Pre-Fed Range Remains Intact

Trading ranges and consolidation patterns can make for tedious discussion when they're well-behaved for weeks on end.  We began discussing the current example in mid-August when the 1.38% ceiling was first rejected.  The following week suggested it was less of a "range" and more of a consolidation pattern--a theme that dominated the analysis ever since.  Despite a valiant attempt after last week's CPI data and yesterday's snowball risk-off rally (thanks Evergrande?), today begins with yields safely inside the same old range.  Barring another unexpected mini-shock, we're left with the same conclusion as in recent weeks: a true range breakout remains most likely after tomorrow's Fed announcement.

The following charts are included just for kicks this morning.  They show how bonds at home and abroad can hunker down with equities markets  and move together in response to less conventional macro risks such as this week's Evergrande drama.  Unsurprisingly, it's easier to see over shorter time horizons.