Both stocks and bonds began to swoon moments after this morning's 9:30am NYSE open. That sort of pervasive selling is often seen when the Fed's rate cut outlook is deteriorating. With the Fed on deck Wednesday, it would be easy to slap "pre-Fed jitters" on the label of today's sell-off and call it good. But Fed Funds Futures don't corroborate that narrative. In fact, nothing does (at least not when it comes to obvious data/events/news). We're left to lean on "elevated random volatility between Thanksgiving and New Years." It's our least favorite explanation, but in today's case, it's also the least stupid one we've seen.
A hair weaker overnight and sideways so far. MBS down 3 ticks (.09) and 10yr up 1.2bps at 4.149
01:31 PM
drifting sideways near weakest levels. MBS down a quarter point and 10yr up 3.5bps at 4.172
03:30 PM
Off the weakest levels, but not much. MBS down 7 ticks (.22) and 10yr up 3 bps at 4.167
Lock / Float Considerations
Assume a higher probability of random volatility until the second week of January. Between now and then, events and data carry risk as well, but bonds have been just as willing to move without any obvious catalysts. This week's highest risk events include Tuesday morning's JOLTS data and Wednesday afternoon's Fed announcement.
