Random, Inconsequential Volatility Driven by Holiday Week Trading Conditions

Random, Inconsequential Volatility Driven by Holiday Week Trading Conditions


Mon, Nov 21 2022, 3:41 PM

No sooner did we finish reading this morning’s warning about the ill effects of illiquidity than the market began offering examples.  For their part, Treasuries experienced a slightly more linear rally between 7:50am and 9:30am with the last 15 minutes being the sharpest.  MBS are much less liquid than Treasuries in general, so they experienced bigger pops and drops depending on the moments in question.  By the afternoon hours, both had settled fairly close to unchanged (Treasuries a hair stronger and MBS a hair weaker), but neither had done anything memorable.  In fact, unless 10yr yields are breaking outside of last week’s range, nothing exciting or important is happening this week.

09:56 AM

Initially flat overnight, then weaker during European hours.  Buyers stepped in at the start of domestic trading and brought yields from a few bps higher to 4.3bps lower–currently 3.786.  MBS are up an eighth of a point after opening an eighth of a point weaker. 

12:15 PM

Illiquidity continues causing issues for MBS (along with a small amount of actual bond market weakness).  10yr yields down 1.7 on the day at 3.812.  MBS down 3 ticks (.09), but nearly 3/8ths from the highs.  

02:46 PM

Some additional weakness after the 1pm 5yr Treasury auction, but finding footing shortly thereafter.  10yr currently down 1.1 bps on the day at 3.817.  MBS down 3 ticks (.09) after being down more than a quarter point at the lows.


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