The week and a half surrounding Christmas and New Years Day tends to play by its own random rules.  Sometimes it fits in with the prevailing trend (in this case, toward lower yields).  Other times it plays host to a consolidation or correction. 

More importantly, you shouldn't get too attached to whatever you see happening in bonds during this time, because it's in no way indicative of what the market will want to do in early 2019.  Granted, the opposite can appear to be true, but it would only be coincidence.  Bottom line, the default setting for this week's trading action is "random."  

One of the underlying reasons for all this is the lack of liquidity.  While this often goes hand in hand with lower volume, liquidity refers to the amount of buyers and sellers interested in transacting at any given price.   Low liquidity means a buyer or seller may have to stretch farther than normal to get their bonds bought or sold.  This increases the amount of movement in Treasury yields or MBS (or stocks, or whatever else is being traded in an illiquid environment).  Simply put, market movement can be magnified in the event that someone really can't wait a week and a half to buy or sell at a price that's off the beaten path.

Bond markets will close early today (2pm ET) and will be fully closed tomorrow.  Don't expect a triumphant resurgence of activity on the 26th either!   Unless something exceptionally interesting happens today, this will likely be the only MBS Commentary article I write.  


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 4.0
101-19 : +0-04
Treasuries
10 YR
2.7670 : -0.0250
Pricing as of 12/24/18 9:29AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Dec 26
9:00 CaseShiller 20 mm SA (%) Oct 0.2 0.3
11:30 2-Yr Note Auction (bl)
13:00 5-Yr Note Auction (bl)* 41
Thursday, Dec 27
8:30 Jobless Claims (k) w/e 217 214
9:00 Monthly Home Price mm (%) Oct 0.2
9:00 Monthly Home Price yy (%) Oct 6.0
10:00 New home sales-units mm (ml)* Nov 0.560 0.544
10:00 New home sales chg mm (%)* Nov 2.9 -8.9
10:00 Consumer confidence * Dec 133.7 135.7
13:00 7-Yr Note Auction (bl)* 32
Friday, Dec 28
9:45 Chicago PMI * Dec 62.0 66.4
10:00 Pending Sales Index Nov 102.1
10:00 Pending Home Sales (%) Nov 0.7 -2.6