MBS Live Day Ahead: You'll Be Tired of Hearing About the Fed Soon

On weeks that close out with the big jobs report, an inordinate amount of headlines include a reference to the impending data.  The same is true with Fed announcements.  Please forgive those of us who stick to this predictable formula.  It's born of necessity because these events are almost always 800lb gorillas with some unknown level of aggression.  Sometimes they leave peacefully.  Sometimes they smash the place up.  At any rate, you'll know we've run out of creative ways to make the same point when you see the classic "All Eyes on The Fed."  

But seriously... all eyes are on the Fed.  Eyes may occasionally be on other things too, but Fed's policy course has been a hot topic--and logically so--ever since the economy began doing things it needs to do in order for the Fed to curtail its supportive policies.  Even if the Fed says it will be months before they make an official change, they are transparent enough and markets are savvy enough that certain economic reports and/or Fed speeches have provided clear messages about the probability of tapering.

How do we know?  It's actually shockingly easy to see the "accommodation trade" play out due to the unique pattern it creates in a chart with stocks and bonds.  Whereas short-to-medium term stock/bond charts are generally more disposed to move in the same direction, the accommodation trade results in clear inverse correlation as both stocks and bonds tend to improve when accommodation is seen lasting longer.  The trademark bilateral symmetry is readily apparent in the last month and change.