1.5 MBS Coupons Are Here! What Does That Mean? Are They Cursed?
There are no significant events on the economic calendar today, and it is the last full trading day of the last full trading week before the winter holiday season. All that to say that trading will be heavily influenced by factors that transcend the simple notion of reacting to data/events in the market. This can include things like "position squaring" (buying or selling to close positions), re-positioning among money managers (adjusting bond market allocations based on shifts in investor preferences), corporate bond hedging (more on that HERE ), and more. All of the above can further be distorted by late day illiquidity as some traders will do what they need to do and punch out early. Bottom line on markets: bonds are going to do whatever they're going to do today. It will probably look a
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