MBS Live Recap: Bonds on Autopilot Ahead of Fed Minutes and Treasury Auction

For the 2nd straight day, trading levels in bond markets held inside a narrow range--far narrower than that seen on any given day last week, let alone the entire week.  This could be incidental or it could be in anticipation of some future event.

The leading candidates as far as future events would be tomorrow's release of the Fed Minutes at 2pm as well as the first serious Treasury auction of the week (5yr Notes at 1pm).  Given that the bigger of the two events hits an hour later, that's where we'd be looking for intraday risk--at least it would be if we were in a more normal environment.

As it stands, the bond market is exceptionally well availed of the Fed's plans and it's unlikely that new information is going to be gleaned from this or any near-term release.  The only exception would be if an unexpected shift in tone begins to materialize, and I think the Fed is smart enough to know they shouldn't discuss such things until economic data gives them more justification to do so.

All that to say we really are "sideways and waiting for ____" again, where the blank space could be a number of things, including the actual move away from "sideways" itself.  Keep in mind that Friday is a half day and markets are closed on Monday, so this week's indecision could merely be a byproduct of a pre-holiday week (i.e. tuned-out traders, putting off bigger decisions until next week or later).