Wednesday's shortened session offered more excitement than the first two days of the week. There was a modicum of legitimate data-driven selling this morning in response to the jobless claims data. Bonds had trudged most of the way back toward unchanged levels by 1pm ET, but volatility picked up again at that point. While 2pm is the official early close, 1pm is the cut-off for many of the largest traders to close out their year-end positions. This makes for a big spike in volume at that time, and it can also result in a quick jolt to prices/yields. As far as year-end jolts go, today's was pretty normal and should not be taken as a sign of any underlying predisposition in the market.
losing ground after claims data. MBS down 3 ticks (.09) and 10yr up 2.1bps at 4.144
12:11 PM
pushing back from weaker levels. MBS down only 1 tick (.03) and 10yr up 1.5bps at 4.138
01:09 PM
Some quick year-end selling pressure. MBS down an eighth and 10yr up 3.4bps at 4.158
Lock / Float Considerations
We're now entering peak holiday mode for bond markets. This means a wider range of movement that can happen for no apparent reason even though the average year sees rates drift aimlessly sideways in the 2nd half of December. The next risk for consequential volatility from scheduled events won't be until the first week of January.
