MBS Day Ahead: Another Slow Trading Session Expected

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Posted To: MBS Commentary

Welcome to the void–the week that bond markets forgot, and/or the week that bond market participants may wish to forget after 3 and a half more days of the lightest liquidity of the year. Keep in mind that liquidity is distinct from volume. The latter speaks to the number of dollars being traded while liquidity speaks to the amount of volume at any given price/yield. In other words, there can still be big buyers and sellers, but they won't necessarily be interested in buying/selling at the same price/yield. The light liquidity is more of a heads-up than something significant. It CAN result in counter-intuitive moves that are bigger than they otherwise might be, but in general, we've already seen a less-than-liquid snowball move (last week's sell-off) setting us up to hold some…(read more)

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