Insultingly Flat Overnight Session; Modest Gains This AM
Not that MBS watchers in the US have much reason to be insulted by the overnight session, but those who were more closely tuned in might have been indignant over their decision to do so. Reason being: nothing happened either in terms of movement or underlying events to cause any. In short, traders in Asia and Europe could have taken the day off and it wouldn't have mattered.
The same stands a fantastic chance to be true for domestic traders today, but even with few market participants, there's no unwritten law that says trading levels can't fluctuate. In fact, sometimes lighter liquidity greases the skids for prices to move more rapidly, but so far, we're just seeing mild improvements in the first hour.
2.59 has set itself up as a bit of a technical ceiling for 10yr Treasuries in the low-volume overnight session, and 10's have run just under 2.56 this morning (2.5605 currently). Fannie 3.5s are up 4 ticks to 100-29 and 4.0s are up 2 ticks to 103-29.
The only significant piece of scheduled data is Consumer Sentiment at 9:55am, followed by the less significant (but still a reason for some traders to stay) scheduled Fed Treasury buying from 10:15-11:00am. After that, participation is likely to die down further.