As-expected, it's been a silent morning for US trading and a surprisingly 'silent night' in Europe as well. There are no market movers, no instances of scheduled data, and no headlines. Still, things are quieter than even those circumstances would typically suggest. After all, the Friday after Thanksgiving was 3-4 times busier than today has been! Here's a bit of deductive reasoning regarding today's uncommonly silent activity: For better or worse, markets are waiting on something or nothing to happen with the Fiscal Cliff before making their next move. The Fiscal Cliff deadline conveniently coincides with the end of the year, which also has a cleansing effect on any "positional predispositions" (in other words, an account might need to be holding a certain amount of a particular security through the end of the year or have a certain amount of particular securities to buy/sell before the end of the year). We also know that Fiscal Cliff developments require lawmakers to be present, and that lawmakers are, in fact, absent until 12/27 at the earliest. Consequently, not only are things slow, but they never had a chance to be anything else (short of a surprise headline that Congressional leaders and Obama are holding secret meetings over hot cocoa around a warm fire at a remote ski lodge, working on Christmas present for America).
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Pricing as of 11:03 AM EST
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Bond Markets Open Slightly Weaker. No Traders Stirring
To give an idea of just how slow things are this morning, consider today's 10yr Futures volume vs that of the last half-day juxtaposed to a major holiday: 11/23. On that Friday after Thanksgiving--an extremely slow trading session--there were just over 30k contracts traded through 9am vs under 10k today. For context, every single session last week saw that number over 100k (so roughly 10% of normal).
Keep in mind that Christmas is a global holiday compared to the likes of Thanksgiving. Tokyo is completely closed today and European markets closed early. The small amount of overnight trading was uneventful to say the least and ranges were incredibly narrow.
Treasuries and MBS kicked off the domestic session in roughly equivalent territory vs Friday's close, although it took MBS a few minutes to get there. Treasuries have leaked moderately higher along with stock futures ahead of the stock market cash open, but in that case, this merely means that 10's are up 0.009% to 1.779%. Fannie 3.0s are down a tick at 104-18.
ll that notwithstanding, prices/yields don't mean much if volume continues to operate at these levels. Barring the massively unforeseen, it should. There's nothing on the data calendar and Congresspeople are tucked safe in their beds, while thoughts of Fiscal Cliff debate dance in their heads. Seriously though... They're gone... Won't be back until 12/27, probably. So yeah... All that can really be done on a day like today in terms of markets, is to watch and react to any surprises. If we've been nicer than naughty this year, there won't be any.
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