MBS Live Day Ahead: Vetoed Veto Sets Weaker Tone For Another 3.5-Day Week

The big news at the end of last week was Trump's decision to veto the defense bill (which, in turn, meant a veto of the broader stimulus/spending bill).  That meant Congress would have the chance to make adjustments or override the veto today, but Trump saved them the trouble last night by signing.  With that confirmation out of the way, bonds had just a bit more selling to do, but trading levels remain in the prevailing ranges.  

The remainder of the week will be similar to last week.  In terms of trading hours, it's a carbon copy with Thursday being an early close and Friday a market holiday.  There are three differences though:

1. Whereas we could assume we were seeing some early month/year-end trading last week, it's even more likely to cause a few distortions this week.  This isn't an incredibly big deal, nor is it likely to be an incredibly big market mover, but it can mean the sudden appearance of positive or negative momentum for no apparent reason.

2. With the stimulus bill completely in the books, markets no longer have to account for an uncertainty on the fiscal side of the equation (at least not until the Georgia senate elections are decided).  That gives some traders a bit more freedom to trade how they want to trade.

3. The slate of economic data is quite a bit lighter and more diffuse.  The most important difference here is the presence of Treasury auctions on the first 2 days of the week.  The baseline assumption here would be that bonds are easier to sell until the auction cycle is over and easier to buy after it concludes at 1pm tomorrow afternoon.