Tame Trading Day Leaves Outlook Intact

The bond market has been in a bullish consolidation pattern since last Monday and today's trading activity did little to change that.  In fact, it did nothing to change that as MBS prices and Treasury yields both stayed "inside the lines" (literally and figuratively).  In literal terms, the lines in question would simply refer to the trends of lower highs and lower lows converging in a narrower and narrower range in 10yr yields.  Bonds will continue to wait for bigger news before making bigger moves, but volatility could increase in the short term as we head into a notoriously weird holiday trading week (not to mention the consolidation patterns are running out of room).

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Jobless Claims 742k vs 707k, 711k prev

  • Philly Fed Index 26.3 vs 22.0 f'cast, 32.3 prev

  • Existing Home Sales 6.85m vs 6.45m f'cast, 6.58m prev

Market Movement Recap
08:41 AM

Uneventful, low volume overnight session for both stocks and bonds.  No major reaction to econ data at 830am.  Bonds holding modest overnight gains with 10yr down 1.5bps and MBS up 3 ticks (0.09).

11:31 AM

ZZZzzz...  That is all.  (same levels as the last update, and not much trading on either side of them since then)

01:43 PM

Decent pop for bonds around the noon hour.  MBS were first in line with a simple reaction to the supply/demand equation revealed by the Fed's buying operation that ended at 11:50am (only 5.7bln on offer versus 3.5 bln in Fed buying).  Treasuries joined in the rally a few minutes later for reasons  that we could only speculate about.  10yr yields are now down 2bps at .85 and 2.0 UMBS are up an eighth at 103-19 (103.59).