MBS Day Ahead: More on the calendar today, but this grave?

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2014 has been an interesting year for the bond markets.  In fact, with regard to its ability to do not continually confuse the expectations of the market, it has been one of the most interesting years of recovery.  It's not because there were no important and unexpected movement.  It is rather because that there was an absolute lack of big unexpected movements!

Although the markets have come to accept the fact that the rates may be lower this year, it's not the end of frustration.  Bonds have found a new way to confuse by loosening of economic data.  Now, on any given day, tradeflows, geopolitical risks or considerations overseas (EQ of the European Union for example) might outweigh the suggestions made by economic reports.

It is good to remain a little skeptical of any notion that geopolitical risk has the absolute authority on rates, but it has no impact.  This is especially true on days when the event calendar is relatively slow as the default expectation is for the world market to move in unison cowardly worms and far "risk."  The simplest expression of this is the stock lever where the prices of the stocks rising and bond yields align with tolerance of increased risk and vice versa.  The relationship is not always 1:1, but it is still easy to see.

To a certain extent, we continue to expect the markets to huddle together around the notion of risk for a little longer.  This is just a fancy way of saying that the 'stock leverage' must stay connected at least somewhat this week.  Two days presents a bit of a wildcard for outlook however.  Today, it is one of them.

The Joker has everything to do with the presence of economic data.  Today brings IPC and sales in the existing home page.  Recently, the markets are most concerned by inflation and housing.  It is not that these things were not interesting before, but there was more emphasis on both between the Fed and others.  This means that any major deviation of the expectations in the data today was a chance to cause a movement.  It remains to be seen if this movement is enough to break the monotonous range.

Priced below are delayed, note the timestamp at the bottom. Real time pricing is available via MBS's Live. 22/07/14 7:39AMEST analyze the MBS and mortgage pricing markets on our dashboard streaming

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