While Friday itself may not have resulted in a rally for the broader bond market, it was nonetheless just as calm as any other day this week in terms of volatility. That's a bit more impressive considering it was the only day with big-ticket econ data. Overall, the week was marked by slow, steady gains for no particular reason. With that, the entirety of August, post-jobs-report did exactly what it was supposed to do. Specifically, it held a narrow enough range to avoid challenging the range set by the last jobs report day. The upcoming week--while shorter than normal due to the Labor Day holiday--is infinitely more capable of producing bond market volatility. Even the supporting actors are arguably heavy hitters in terms of econ data. Friday's jobs report speaks for itself. Bottom line: additional labor market weakness could easily help bonds break new ground at lower yields while unexpected resilience could firmly reinforce recent floors.
Minimal movement after PCE data. MBS are down 2 ticks (.06) and 10yr yields are up 1.4bps at 4.22.
01:03 PM
Slightly stronger heading into PM. MBS down only 1 tick (.03) and 10yr up 1.9bps at 4.224
Lock / Float Considerations
With rates hitting 10-month lows 4 times this week, risk-averse clients are still in lock mode. Risk-tolerant clients have enjoyed a very narrow rate range in August, but they should be aware that the coming week is all but guaranteed to see a much wider range, for better or worse.
