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Today's Session Coasting Uneventfully Into Holiday Weekend
Posted to: Micro News
Friday, December 21, 2012 3:14 PM
While Monday is technically a half-day for bond markets, it's more appropriately viewed as part of an unofficial 4-day weekend. In fact, if today's trading activity and directionality is any clue, make that 4.5 day weekend!
Things were a at least active enough in first few hours to matter, but markets quickly set about the task of finding their range following the "risk-off" move inspired by last night's political drama (House not passing or even voting on Plan B tax/spending bill).
There was a brief bounce back toward higher prices and yields as Boehner and Cantor took the podium around 10am, but no follow-through. Stocks fell back to previous AM lows and ever-cautious bond markets decided to simply "go no higher in yield" rather than swing back down to morning lows.
In terms of 10yr yields, that implied ceiling is 1.76 while MBS have been holding 104-21 as their post-press-conference floor. That's an eye-wateringly narrow 2 ticks from the morning highs that prevailed during rate sheet time. So if we happen to leak into weaker territory in these last two hours, it probably only makes sense to care about a break below the 104-19 level, which also came into play as support after the press conference. That said, please note that there's no way to know whether or not a lender or two will reprice for reasons other than MBS price movements. In that regard, past precedent is the best indication.
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