MBS Live Recap: Bond Traders Break Out The Bumpers

Bond markets had a reasonably good day, all things considered.  The caveat is that we shouldn't read much of anything into today's trading because it was exceptionally light and downright mechanical at times.  

By that I mean that it looks like trading desks had certain technical levels set like bowling bumpers.  Every time other traders tried to take yields outside those bumpers, there was an inevitable push back.  

This was most notable in the early overnight session with multiple successive bounces on both sides of the lane.  But the bumpers remained relevant at the busiest time of the morning following the domestic econ data.  A true testament to their relevance came in the afternoon.  This light volume, illiquid environment is perfect for observing these sorts of mechanical "bumper" style technical levels.  Needless to say, the bumpers won.

So what's the implication?  Not a thing!  Well, nothing much, anyway.  For the optimists, I'd point out that yields held  under that ceiling despite coming under threat from 2 solid pieces of economic data and that bonds continue to hold their ground better than other markets might suggest (i.e. stocks and Yen moved higher again).  

For the pessimists, I'd say that bonds aren't much interested in econ data right now unless it's a top-tier inflation report.  Any appearance of resilience could merely be a factor of month-end bond buying, and finally, that the divergence from stocks and Yen is just as much of a risk for the future as it is a positive development in the present.