Although there's a decent enough lineup of economic reports this morning, including New Home Sales, Durable Goods, and Personal Consumption Expenditures, volume has been, and will continue to be quite low as market participants count the minutes to today's early close (2pm Eastern, but unofficially, shortly after the last piece of data hits at 10am).  Here's the morning alert from MBS Live:

Bond Markets Slightly Weaker on Inconsequentially Low Volume 8:17 AM

We hit the 8am mark this morning with just under 29k 10yrs futures contracts having changed hands. That's the lowest we've seen all year, and there's some similarly themed analysis from ICAP this morning: "There may be more economic indicators on the calendar today than there will be market participants around to react to them." 

We can't really say it any better than that... Even though there are a few pieces of economic data on the calendar, they'd have to be mindblowingly far from the consensus in order to rouse much of a response. Beyond that, there's always the possibility of an unexpected Euro tape-bomb, but of course, that too would need to be large and well constructed tape-bomb if it's to do any damage to domestic markets. 

The low volume means that price action could be somewhat distorted. As we said yesterday, we really wouldn't draw any conclusions from trading levels until the new year. From a market-watching perspective, we're all sort-of working the metaphorical night shift, guarding a jail full of cute little puppies and sweet old grandmothers: sure, there's a tiny chance that such a combination could spell trouble, but more likely than not, we can probably just doze off.

Fannie 3.5's are down 3 ticks so far this morning at 102-07 and 10yr yields are nearly 2bps higher at 1.9719.  The first economic data hits at 530.  Here's a more complete run-down: