The Day Ahead: Quiet Session to End Busy Week


Bond markets spent most of the day yesterday defending recent ranges as MBS and 10yr yields were both backed up against recent technical support.  Things were particularly interesting in 10yr yields where the 100-day moving average exactly matched the 50% retracement level between the highs and lows since August 2011.  MBS were defending the 103-00 level in Fannie 3.5 coupons.  Both technical levels were broken on several occasions throughout the day, but held up modally (as in they represented “the mode” of the data set of bounces) and most importantly, remained intact by closing time, both the 3pm and 5pm varieties.

The interesting thing about yesterday was the the weakness didn’t seem to dra much on any of Thursday’s events, but rather, was seen almost exclusively in overnight trading following through on Wednesday’s weakness.  Thursday then, was more about assessing where bond markets would make their stand against that weakness with yesterday’s data merely serving as supporting actors suggesting minor course corrections along the way.

There will be no such actors today, however, at least not in terms of scheduled economic data.  10am brings the only data in the form of ISM New York’s manufacturing index.  This report is not even important enough to make it onto most economic calendars.  The only other event on the calendar is the Fed’s scheduled buying in the long end from 10:15-11:00am.  These buybacks have certainly garnered the lions share of volume and volatility on many occasions, but tend to leave trading levels close to pre-buyback levels a few hours later.

Mostly, today is notable as the “calm before the storm” of next weeks Greek private sector involvement deadline and The Employment Situation Report.  Oh!  That brings up an important point… THERE IS NO NFP TODAY!  Yes, it’s usually the first Friday of the month, but not when such Friday’s fall in the first few days of March or when they fall on the first of any month.  All in all, it’s shaping up to be a quiet day if we don’t see some interesting Euro zone headlines.  We should emphasize, that’s “quiet” in terms of volume, which can sometimes result in more erratic price/yield movements.

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