MBS RECAP: Late December Liquidity Causing Volatility

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Posted To: MBS Commentary

Last Friday I said that bond traders had "had enough" when it came to reacting to every little tax bill headline. That theme held true today, but now we might also say that traders have "had enough" of active trading for the year as well. In fact, last week's recap touched on this topic in discussing the waning liquidity heading into the end of the year (i.e. last week was characterized as "last call" for active trading ). A highly liquid marketplace is a bustling marketplace. Late December sees the bustle die down among bond traders. There is still plenty of money changing hands, but a far greater percentage of it is now being driven by boring, compulsory factors, like year-end portfolio adjustments and general hedging activities that don't even register…(read more)

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