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  • Monday was the slowest day of the year in terms of volume.  Volatility was also very muted by the time US markets fired up for the day.  But here comes Friday!  Not to be outdone by that pesky old Monday, today took the quiescence to a level so high that I felt compelled to tell you about it again.  Realistically, this is something market analysts do because the quiet conditions don't leave a...

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  • When a single, clearly-delineated event was responsible for 30bps of movement in 10yr yields in the matter of a few days, it's hard to get too worked up about 10bps of movement over the same time frame.  It's even harder when that 10bps has occurred well-inside that 30 bps AND when any individual day has been limited to about 6bps.  The above is in reference to the 3.10% to 2.80% drop (and su...

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  • Grandparents will always have at least a few stories about "the way things used to be."  Those old ways may seem inefficient, strange, wonderful, or all of the above to the younger generation.  For market watchers, the generational divides aren't measured in 2-3 decades but rather 2-3 years (and sometimes 2-3 days!).   With that in mind, our market-watching forebears have stories of this stuf...

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  • By now, it's no great secret that pundits, analysts, and financial firm principals are pontificating on the next economic downturn.  Guesses vary, but 95% of them are within the next 2 years.  Perhaps as many as half of them are targeting a time frame of 12 months or less.   Certainly, trade war potential combined with central bank normalization underpin much of this general thesis, but there...

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  • Before the Italy drama picked up at the end of May, bonds were very much on the bad side of the fence.  Italy quickly punted rates to the other side of the proverbial fence, but the good times didn't last long.  As we moved toward last week's central bank announcements, rates/bonds did what they had to in order to keep in line with the 21-day moving average (the center of the popular Bollinge...

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  • I talk quite a bit about the "long-term trend" or the "longer-term trend" these days.  It most frequently comes up in some iteration of the following: "until the long-term trend has been clearly defeated," etc.  But what exactly are we talking about? The following chart has several iterations. TOP: This is the most relevant of the 3 for the lock/float outlook.  It leaves some room for correct...

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  • June began with yields plateauing after rising from the Italy-inspired lows of late May.  10yr yields managed to avoid breaking above 3% until last week's much-anticipated Fed Day.  Even then, the Fed and the ECB ultimately gave way to the slow, steady rally that's persisted into the current week. Until today, that rally was nice, but forgettable, as it merely got us back in line with the low...

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  • You're welcome!  I knew if I lamented the slow and boring nature of the week ahead yesterday that I could trick the bond market into doing something exciting.  Sure, it was a 50/50 chance that my little ploy could backfire, but at least there would be something exciting to talk about.  And now here we are with 10yr yields staring the day down more than 4bps. Fake superstitions aside, bonds ha...

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  • These sorts of days (where nothing happens) happen.  If you had to bet on a day of the week and a time of year to see them, Summertime Mondays would probably be the safest bet.  Overnight volume was almost nonexistent, with much of Asia closed.  Domestic volume and volatility was effectively nil with today's trading range falling easily inside Friday's.   On a positive note, despite the low v...

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  • Post-Italian drama, bond yields rose for 2 straight weeks heading into last week's Fed and ECB announcements.  They both proved friendly and the positive momentum continued on Friday.   The timing of the Italian drama was important because it began helping bonds right as US 10yr yields were hitting 7-year highs.  As yields rose back toward those highs early last week, it was fair to wonder if...

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  • Fresh fears of trade wars pushed stocks and bond yields lower in the overnight session as the White House promised another wave of tariff announcements in the morning.  China retaliated by promising its own tariffs and markets slumped accordingly.   By "accordingly," I mean they slumped as much as they have for any other trade war headline after the initial shock wore off--i.e. not too terrib...

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  • Bond markets have their rally caps on after making it through both central bank announcements this week without suffering any crazy damage.  In fact, each day brought modest improvements and now today stands the chance of bringing enough of a rally to "confirm" those improvements from a technical standpoint. That's about the size of it at the moment.  We're watching and waiting with fingers ...

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  • We knew the ECB (European Central Bank) was going to have to address its bond buying program soon, because it expires after September.  Several speakers had alluded to the likelihood that it would be addressed in today's announcement.  Markets took that to mean that Draghi would finally talk about the probable tapering announcement at the subsequent meeting. Instead, the ECB just went ahead a...

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  • Today's domestic session begins with a positive reaction to the European Central Bank (ECB) announcement.  The ECB broke from tradition by dropping their bigger bombs at the 7:45am announcement as opposed to Draghi's 8:30am press conference.  They also arguably dropped the proverbial mic in a way we haven't often seen by making definitive statements about bond buying and rates well in advance...

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  • In one sentence, today's Fed rate forecasts pushed bonds into weaker territory at 2pm and Jerome Powell's press conference helped to recover most of the losses. The forecasts showed a slightly higher probability of 4 rate hikes in 2018.  The average "dot" (so named for the dot plot on which the forecasts appear) also moved a hair higher in 2019 and 2020.  This was the key market mover at 2pm,...

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  • Information received since the Federal Open Market Committee met in MarchMay indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderatesolid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low.declined. Recent data suggest that growth of household spending moderated from its strong fourth...

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  • "The dots" refer to the Fed's periodically updated economic projections.  "Periodically," in this case, means 4 times a year out of the 8 annual Fed meetings.   "Economic projections" is a misleading term, not because the Fed isn't actually publishing such a thing, but rather, because no one really cares what the Fed thinks GDP and job growth will do.  Markets are only interested in the part ...

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  • Today turned out to be a dud, thanks to a completely uneventful CPI reading as well as a right-down-the-middle 30yr bond auction.  Neither of these events were necessarily destined to shake things up, but CPI certain COULD have (if it fell far from forecast).   When it comes to tomorrow's Fed events (which include updated forecasts and a Powell Press Conference), we can assume that there are ...

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  • Bonds are starting the day in a slightly weaker stance yet again.  While we managed to come back from a weaker start yesterday, it's worth checking in with the important defensive ceilings.  If this week continues to be unfriendly, these ceilings would be like mile markers from bad to worse. Moving over 3.035 would imply another potential showdown with long-term highs, but we'll cross that b...

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  • History suggests that Fed/ECB meetings in June are more than up to the task of causing significant volatility in bond markets.  It also suggests that summertime Mondays often turn into unofficial 3-day weekends.  Both options are still on the table for this week as today just passed without any fanfare whatsoever.  Yields were slightly higher in the overnight session, but notably opted to hol...

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  • Bond markets have weathered the storm of Italian political drama, which created the bulk of volatility over the past 3 weeks.  They've considered the implications of various tariff-related developments at home, as well as the implications for potential European Central Bank tightening abroad.  That has played out against the backdrop of steadily increasing Treasury supply and a slow-but-stead...

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  • What a quiet and boring trading session it was!  Well, to be fair, there's still half an hour left as I type this, but most bond market participants mark the end of the day at 3pm E.T.  By that time, we were almost perfectly unchanged and hadn't seen a lick of volatility--quite impressive given yesterday's volatile "flash rally" move. Those sorts of big, inexplicable rallies tend to result in...

Mortgage News Daily
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  • The day is young, but the fact that we're starting out with much of yesterday's "flash" rally intact means that new doors are opening for bonds.   Next week's central bank announcements are--well... central to any assessment of near term possibilities.  Because we have the Fed and ECB back-to-back, and because the Fed's announcement will include an update to the economic projections (one of t...

Mortgage News Daily
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  • Today ended up being all about the early afternoon "flash crash" in bond yields (from 2.94 to 2.884% in fairly short order).  While they're not common, these sorts of things do happen from time to time.  The most notable past example in October 2014 was quite a bit bigger than today's.  It occurred near the stronger edged of a longer-term downtrend in rates and completely obliterated that ran...

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  • Stop me if you've heard this one before.  Here's a formula for one of the ways bond markets move: Rates fall based on a particular risky eventuality.  While that the likelihood and the impact of that eventuality is being assessed, the rally continues.  As soon as more dire outcomes start getting checked off, yields begin to move higher until the the rally is mostly erased. That's a pattern th...

Mortgage News Daily
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  • Bonds were weaker right from the start today as the overnight session saw several members of the European Central Bank comment on tapering prospects.  Granted, they're not calling it "tapering."  They're not even referring to any distinct event.  Rather, the discussion is about the general notion of "not buying bonds."  Whether they taper or quit cold turkey remains to be seen.  The important...

Mortgage News Daily
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  • I owe you an apology.  I caused a bit of a sell-off in bond markets today.  It all started yesterday afternoon when I called attention to the fact that Italian headlines and credit spreads were still moving markets even though they shouldn't be.  Markets didn't like being pigeon-holed apparently and have taken the opportunity overnight to show that they don't NEED Italy to set the tone.  Case...

Mortgage News Daily
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  • With European drama subsiding heading into this week and with yesterday seeing a logical move toward weaker levels, it was fair to be worried about more selling today.  After all, Italy-related risks flared-up.  Rates fell.  Italy risks subsided.  So rates should be rising. That's not to say that Italy was the only game in town, but it was the only game anyone was trading or talking about las...

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