MBS Live Day Ahead: Lots of Data, But All Eyes on Brexit

Yesterday saw a swath of Brexit headlines spark unavoidable bond market weakness just as a weaker reading in the important Retail Sales report suggested a rally.  Offsetting penalties, back to the line of scrimmage!  Bonds ultimately ended green on the day, but that was largely made possible by the heavy losses from Tuesday's session (brexit-driven as well).

Heading into today, Brexit continued to hog the spotlight as far as global markets and US Treasuries were concerned.  News of a NEW and potentially viable deal hit hard overnight with GBP (British Pounds Sterling) and EU bond yields surging higher.  Treasury yields were pulled along for the ride in heavy volume.  10yr Treasuries hit their highest yields in just shy of a month (Sept 19th was higher, but just barely).  Doubts began to emerge after that, however.  Bonds recovered most of those losses by the start of the day. Here's how it all looks on a chart:

And here are the same indicators over a longer time frame.  This shows just how much of an impact Europe and Brexit have had on the US bond market, even as the US/China trade deal ostensibly had control of market momentum.

From here, the next key development will be Saturday's parliamentary session in Britain, where lawmakers will vote on whether to pass this new deal or ask for another delay from the EU.  Markets are leaning toward the "delay" option.  There's some small chance the EU could take a hard line and deny that request, but they'll probably cave, based on the appearance of progress in the last 24 hours.  Either way, there's significant risk of big reactions to Brexit-related headlines today, tomorrow, and especially over the weekend.