MBS RECAP: Pre-NFP Bond Markets And Meteorological Cliches
Thursday, January 31, 2013 4:07 PM
Unlike some pre-NFP Thursdays, which start to exhibit some sort of “lead-off” in either direction, today’s was poster child for “calm before the storm.” Actually, that would assume that tomorrow’s NFP creates a storm, so it’s not a perfect analogy just yet. On the other hand, today fits the “calm” requirement so well that almost anything that happens tomorrow would look like a storm by comparison. The calmness set in with a vengeance after bond markets shook off the last vestiges of directional movement after 10am. A brief Chicago PMI-related hiccup added a bit to the corrective momentum that was already in play after the much stronger than expected Personal Income report. Since then, we’ve been very sideways, in a very narrow range and are now heading into the last hour of the day right in line with yesterday’s closing prices. Given the recent levels of volatility, this is calm indeed. But don’t let that calmness engender complacency, let alone expectations for “no storm” tomorrow morning. Such a storm remains very possible, and despite some of the push-back against the notion of further bond market weakness from the analytical community, there’s more room for weakness if the number is big enough tomorrow. that said, a disappointing number probably makes for a quicker, more decisive swing back to lower yields.
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