ISM Non-Manufacturing was this morning’s biggest potential market mover, but it came in very close to consensus. Moreover, its internal components somewhat offset each other in that the inflation (“prices paid”) component was much weaker while the Employment component was much stronger. Both before and after the data, bonds barely budged, though they did begin the day slightly weaker due to overnight market movement.
Volume totals in bond markets were roughly 2/3rds of the recent average. Apart from half-days and certain trading sessions in the middle of the winter holidays, that’s about as low as it goes. In fact, using 10yr Treasury futures as a benchmark, today’s volume was the lowest since Dec 28th 2016.
That’s not exactly what we’d expect on the Monday after NFP Friday where bonds hit the best levels of the year. In fact, to go from THAT to THIS is very rare–especially in light of the fact that there were several relevant economic reports on tap.
The low volume, low volatility sideways grind suggests traders got “close enough” to where they wanted to be as bigger potential market movers approach. In other words, rates are willing to break well into 2017 lows if Thursday’s Comey testimony supports scandal theories, but they’re ready to bounce back if it does not.