MBS Live Recap: Lots of Sound and Fury, But Little Significance

 "Full of sound and fury, signifying nothing"

That's one of my favorite lines from some old book I read, or maybe it was a play (hint: it was a play!), because it operates so well outside Macbeth's lamentation of the futility of life.  In our case, it often serves to highlight a different sort of futility--the one where market-watchers attempt to ascribe meaning to every little up and down (and especially to the bigger ups and downs).

In market-watchers' defense, this is often a worthwhile endeavor as there is often a solid enough collection of evidence for connections between events and market movement.  Other times, attempting to find such connections amounts to square pegs in round holes.  Today is one of those times.  My friends over at BMO Capital Markets already put this better than I would have:

"There are some days where the price action itself is the main story, and Wednesday certainly fit in that category. At the risk of overusing the term, prices can change more than facts, as the fundamental landscape remains intact. Rather than try to backfit a narrative on a day which failed to manifest a consistent underlying impetus for cross asset price action, we’ll take the modest repricing higher in yields at face value and instead consider whether a retracement or extension may be in offing in coming days. Technicals and correlations may guide near-term fluctuations in asset prices, but any sustainable break of the tight range-bound trading will be predicated on economic data and/or a shifting geopolitical outlook"

This is great stuff.  The translation is that bonds moved at their own pace in their own direction for their own reasons today, and the best we could do would be to point out that there was a fairly clear yield bounce at the lower end of the trading range that subsequently found support at the upper end.  For a bigger move to occur, we're still waiting on actionable, fundamental data, and we didn't get any of that today.

The absence of data isn't for lack of candidates!  We had Powell's testimony, Cohen's testimony, and Lighthizer's trade war updates all vying for attention around the same time.  Ultimately, the absence of correlation between stocks and bonds suggests there was no risk-on/risk-off vibe in play, and no "friendly Fed" trade either.  I talked about this in greater detail in today's MBS Huddle.

Tomorrow brings the first GDP reading we've had in a while, and it's a bit of a hybrid report, according to this update.  This transparency will help traders make better use of the otherwise suspect data ("suspect" due to the unknown impacts of the government shutdown on the processing of the data as well as the data itself).