Japan was out for a holiday today and US markets might as well have been. Apart from the first few minutes of the domestic session, today was one of the calmest days in terms of volatility in recent memory. From 8:30am on, Fannie 3.5 MBS held a range of 101-18 to 101-21 (less than an eighth of a point). 10yr yields held between 2.596 and 2.581.
Against the backdrop of every other day of September, today is the most resoundingly positive for bond markets. That sounds a lot more fun than it is though. Reason being: today’s strength was facilitated by the rampant weakness that preceded it. The past two weeks have been the worst since the first 2 of November 2013. Friday saw the weakest levels in over a month. Today’s strength was merely a token correction to the broader trend.
To say “all eyes are on Wednesday’s FOMC events” would be a huge understatement at this point. That made it easier to treat today as a 3rd weekend day. Any inherent biases ahead of Wednesday’s FOMC news should be more apparent in tomorrow’s session. It could go either way. Despite all the hype, the outlook is fairly well mixed as to what the Fed may actually change.