MBS RECAP: Markets Offer No Sign of Pre-Yellen Tilt

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As we discussed this morning, sometimes markets will take a “lead-off” ahead of a big potential market mover if there’s an underlying predisposition that traders have been ‘hiding’ (for lack of a better term).  This has resulted in some surprisingly big moves ahead of things like NFP releases and Fed Announcements over the years.  Even without such a big movement, we still usually see some signs of increased bet-making on the run up to the big event.

But not this time.  Bonds gave no clues about what they might be thinking ahead of Yellen’s Jackson Hole speech tomorrow.  That said, they did react in some small way to the stronger Durable Goods numbers.  Before that, bonds were in just slightly stronger territory through the overnight session.   When Durable Goods came out (+4.4 vs +3.3 forecast), Treasury yields rose by a whopping 2bps.  They promptly fell back to ‘unchanged’ by 11am.

The afternoon brought a fairly lackluster 7yr Treasury auction, which applied another token amount of pressure on bond markets.  All of this is much ado about nothing, however, because yields are very much inside the same old range.  Moreover, today’s trading range was one of the narrowest of the already-narrow range.  

In a vast sea of uninteresting bond market movement, we can at least look forward to tomorrow.  Yellen’s speech is so hyped that it would be interesting to simply see whether it moves markets or not.

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