In yesterday’s MBS Recap, we noted a general repetition of the previous sessions trading patterns, volume, and volatility. In fact, each day this week has born a striking similarity to the others. Even if we’re not perplexed (ok, maybe we’re perplexed), we’re at least interested in the fact that each day has had a similarly narrow trading range.
This isn’t interesting because the day’s have been so narrow, but more so because the narrowness arrived on Monday and then simply flatlined. After a watershed event like last week’s QE3 announcement, we’d expect the music to sound more like a loud, sustained final chord that gradually fades as opposed to the strangely placed forte piano that we’ve instead been given.
Here’s a note by note visual on what we’re talking about in a chart of Fannie 3.0 prices. The vertical bars represent the trading ranges for the ensuing day while the minute-to-minute action is “ghosted” in between the bars.
Weird, right? This week has been no help in determining what’s going on as it’s taken place entirely inside Friday’s trading range. We’ve been recently willing to put a little more weight on the leg that connects MBS to Treasuries, but it’s definitely not fully healed yet. If we were seeing a better level of correlation by now, we might be somewhat heartened by the fact that Treasuries seem to have fared well this week, but there again, volumes have been low and data/events essentially absent.
Speaking of absent data and events, yeah… that… today… in full effect. We see nothing going on except maybe Fed-speak from Lockhart, a Fed Twist buyback, and various other even less consequential tidbits such as ECRI’s weekly numbers. The European calendar is similarly mum. Early weekend? Oh wait… All-time low rates… Extra time to get work done without a microscope on MBS trading. Of course if it turns into something microscope worthy, we’ll let you know.