There continues to be nothing too much to write home about when it comes to post-NFP October in bond markets. There has been a range of 2.0-2.08 that has remained mostly intact since then–especially in the second half of the month. After testing the higher end of the range at the end of last week, rates moved quickly to the other end of the range this week, but that’s about it.
We wouldn’t necessarily expect a massive break of this range before the Fed, but overnight movements in oil and European bond markets might have suggested it under different circumstances. In other words, if it wasn’t Fed day tomorrow, and if the Fed still didn’t stand any chance of alluding to a December hike, our performance might be a bit stronger here.
That said, if it wasn’t Fed day tomorrow, bond markets might not care so much about oil, considering that’s one of the lynch-pins of the Fed’s inflation hopes. If oil is hitting 2 month lows right as the Fed is meeting, that makes it relatively less likely that they’ll be eager to allude to future hike plans. Apparently that’s only good enough for 3.3bps of a rally in 10yr yields and a quarter point improvement in Fannie 3.0s. Could be worse.