The last week of Summer continues to be the last week of Summer as far as markets are concerned. Email auto-responders are working overtime, parents are back-to-school shopping, and market-watchers have yet another opportunity to remember that Wall Street–despite the alluring idea of “black box trading”–couldn’t run without human power.
As strange as it may be for the average “Occupy Wall Streeter” to consider, the guys and gals that make the trading world go ’round are remarkably normal. They don’t have secret parties where they drink the blood of the underprivileged, but instead enjoy the same sort of Summertime days off that everyone else does. When that happens en masse, the effect on trading activity is noticeable. Yesterday was the 2nd slowest day of the year and today was not much better.
There are two kinds of “low participation” bond market days. In one variety, the low volume greases the skids for volatility as anyone trading with an agenda can have an outsized impact on prices/yields. Today’s version is the opposite, where those left in the office are simply trying to make it through the day with minimal drama.
Indeed, there was relatively little drama today. While the record-setting headline on Durable Goods was a cute anecdote, the internals were weak enough to motivate some bond market strength early. This was reversed at the stronger stock market open and the reversal was reinforced by stronger Consumer Confidence data. The net effect is MBS prices at or near ‘unchanged‘ levels in the final hour of trade.