Last Week

- Bond markets increasingly sold off heading into debt ceiling deadline

- Short term debt market panic led the way lower for other bond prices

- MBS gained back a point of losses after the debt deal

- highest prices and lowest rates since June

This Week

- Week begins with more economic data on the horizon, Existing Home Sales Monday

- Still unclear as to which remaining reports may be delayed

- Census Bureau says working "aggressively" on updated timeline

- Jobs Report is confirmed for Tuesday; should be focal point of the week

Strategy

For all the sound and fury produced over the past two weeks, trading levels in bond markets returned more-or-less in line with the trajectory that preceded the debt-ceiling drama.  Now, as then, it seems that the preoccupation has been with the lack of data, especially the Employment Situations Report (or NFP, or "Jobs Report," or "Payrolls").  The report that had been due out on October 4th will now be released on Tuesday the 22nd.

Several Fed speakers--even those who haven't been supportive of continuing QE--mentioned that the removal of accommodation is likely to be on hold until effects from the Fiscal drama can be assessed.  Put another way, the Fed wants to be sure the economy can demonstrate enough forward progress before beginning to withdraw accommodation.  While October's FOMC meeting has been all but ruled out as the scene of a tapering announcement, December's remains an outside possibility--even if a dim one, owing to the looming expiration of the short-term debt ceiling deal in February 2014 (and no "hard deadline" until March).

Existing Home Sales is scheduled for release at 10am this morning and expected to come in at a 5.32 annual pace.  This would be the biggest counter-trend movement since early 2011, but apart from the past 2 months, still the highest reading since 2009.  There is no other significant economic data scheduled.  To reiterate, the focus is on Tuesday's payrolls data.

Charts

Fannie 3.5 MBS

Existing Home Sales