After Friday's orgiastic frenzy of bet-making and profit taking, bond markets sat back in their seats and abstained today. In poker terms, this is a "knock" or a "check" where no bet is made if it's not required. In essence, the big hands were played with gusto on Friday and now we're waiting to see how the game unfolds.
At stake is a break outside the 3 month range, which looked to be a legitimate possibility on Friday when rates shunned the stronger jobs data and continued to the lowest levels possible without actually breaking the range. Today saw a slight pull-back, but only after stronger data (ISM Non-Manufacturing) actually did what stronger data typically does: cause weakness for bonds.
Before ISM, trading levels were edging into even better territory, but fell back just inside the confines of the long term range afterward. There were no further reports, events, or headline worth reacting to and MBS drifted sideways for the entire remainder of the day, in an excruciatingly tight range.
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