MBS Live Recap: Bonds Officially Held January's Range Ahead of March Fed Announcement

Bonds began the day in weaker territory following overnight headlines suggesting European leaders would be going up to bat for a compromise Brexit deal.  "Less bad" economic data in Germany also contributed to European bond market selling. 

At the start of the domestic session--particularly the 8:20am CME Open--there was a glut of sell trades in the bond market.  This resulted in what was, at the time, the biggest volume spike of the day (by far) and a noticeable uptick in yields. Technical levels were first to provide support with 10yr yields bouncing at 2.63%.  After that, US/China trade headlines helped take yields to their lowest levels of the domestic session just before 1pm, though the rally proved to be short-lived.

Bonds ended the day slightly weaker but close enough to 'unchanged' that the bigger picture is still very flat.  This is what we have been expecting to see on the day before the March Fed announcement for months now.  If anything, I'm surprised that we haven't seen a bigger challenge to the broader sideways range boundaries set in January (2.55-2.80).  In fact, we haven't seen any challenge of those boundaries.  We might not see one tomorrow either, but we will likely see significantly more volatility than we've seen so far this week.

The Fed statement prints at 2pm ET along with the updated economic projections (aka "dots").  Then at 2:30pm, Jerome Powell will hold the now customary post-announcement press conference.