In the day just passed, we considered a rather melodramatic question ("is it over?"), which refers to the general strength in the bond market seen in August and our ability to maintain (or improve upon) the lowest rates in 3 years.  Early weakness came from the European bond market following more reports that Germany was considering fiscal (not monetary) stimulus.   A general "risk-on" bounce was also in effect following last week's lows in stocks and bond yields.  It was a fairly quiet session, however, and we surmised it was simply a logical opportunity for markets to consolidate amid a relative lack of market-moving headlines.

In the day ahead, we'll bask in the confirmation of yesterday's assessment.  While these things can never be known ahead of time, it's good to see that yesterday indeed looks like the consolidation opportunity it seemed to be.  Case in point, yields quickly and easily defeated the uptrend that caused mild concern yesterday afternoon.

2019-8-20 open

From here, rather than take this as a cue for another vicious rally to new long-term lows, I think it's slightly more likely that we'll see a broader consolidation ahead of this weekend's Jackson Hole symposium (although that event has increasingly reserved the right to "not matter" in recent years).  A case can easily already be made for consolidation in stocks--especially if there's any more weakness today.  The bond market version isn't quite as symmetrical, but it's still potentially there.

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There are no significant events on the econ calendar today--a fact that only adds to any traders' predisposition to circle the wagons ahead of the Fed events (tomorrow's Minutes and Friday's J-Hole).


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 3.0
101-24 : +0-06
Treasuries
10 YR
1.5610 : -0.0370
Pricing as of 8/20/19 8:57AMEST