Less Consequential Data and Fed Blackout Leaves Focus on ECB

This week's economic data is primarily focused on the housing market with NAHB, Housing Starts, and Existing Sales on the first 3 days respectively.  While that's interesting to those in the industry, these reports don't tend to be huge market movers.  Thursday's European Central Bank (ECB) announcement is a bigger deal as it's expected to raise rates for the first time in 11 years.  There's even some debate about a 25 vs 50bp hike, thus opening the door for some volatility.  A virtually data-free Friday could end up seeing volatility as traders position for next week's Fed announcement.  

Pre-Fed positioning was the order of business last week as CPI pushed expectations higher before Fed speakers (especially Waller) and Consumer Sentiment ushered a drop in rate hike expectations by the end of the week.  Whereas expectations were ramping up for a 100bp hike next week, they ultimately fell back down to 75bps--the current consensus.

Bonds may feel like they're experiencing quite a bit of volatility, but it remains well within recent ranges.  Last week suggested boundaries of roughly 2.90% on the low end and 3.10% on the high end.  Adding another 2 weeks to the look-back expands that range to a full 50bps (2.75 - 3.25).

Bonds are starting out weaker today, with 10yr yields up more than 8bps and MBS down roughly a quarter of a point.