MBS Live Recap: Fed Statement Not Pessimistic Enough For Some Traders

Today's Fed announcement turned out to be a dud.  It's getting headline treatment here based solely on street cred.  In and of itself, it could scarcely compete with today's AM economic calendar.  Of particular interest was the Treasury's quarterly refunding announcement.

Normally a sleeper of a market mover, the refunding announcement was more closely scrutinized this time around for two reasons.  First, traders wanted to see if there would be any increase in Treasury issuance to offset new spending plans.  Beyond that, the announcement served as an opportunity to debut the longer-term bonds that Mnuchin has mentioned on several occasions recently.

As it happens, the longer term bonds were mentioned, but they weren't announced outright (to paraphrase, they're "currently studying the possibility of issuing bonds with maturities greater than 30 years").  While this was big news in terms of volume, it was more of a money shuffle among existing Treasury trading positions.  

The Fed statement indeed ended up being the big market mover of the day (which isn't saying much today), but that has just as much to do with traders needing to wait and see what the Fed DIDN'T say as opposed to needing to react to what they DID say.  

They didn't say much--essentially telling us about the gloomier Q1 developments (which we already know about) in a non-gloomy way.  The traders who were hoping the Fed wouldn't pull punches were then forced to hop on the bandwagon of bond selling.  Despite all that, 10yr yields still managed an "inside day" (today's yields remaining inside yesterday's range.  Given today's calendar, an inside day is the ultimate expression of a market that's anxiously awaiting a true source of inspiration.