Yesterday

- Effects of holiday staffing levels already apparent in volume and liquidity

- MBS underperform (chart below); volatile session; ends relatively unchanged

- Pending Home Sales continued to struggle, but no major market reaction

- No reaction to 2yr Note auction

This Week

- Today's 5yr Note auction is more relevant, but not a major event

- Consumer Confidence is day's key data release, best shot at movement (chart)

- Other data includes Case Shiller and FHFA Home Prices

- Housing Starts/Building Permits delayed again.

Strategy

Here on November 26th, it might seem like the government shutdown that ended in mid-October is far enough in the rearview that we wouldn't still be coping with delayed economic data, but alas.  The New Residential Construction report (Housing Starts/Building Permits) stays on vacation until 12/18/13.  Given the slide in Pending Home Sales and several other housing-related metrics that tend to correlate with the official construction numbers, the forecast increase in Building permits (to 930k from 926k) would have been a strong showing.

Thankfully, the construction data wasn't the best shot at a market moving report for today.  That role fell to Consumer Confidence, which will be reporting as usual at 10am.  In many ways, Consumer Confidence can offer a suggestion as to how much attention we should pay Wednesday's data, provided it's far enough from consensus.  The only interesting result would be one where a small-to-medium beat/miss ends up having a noticeable impact.  In that case, we'd want to be doubly wary about  Wednesday's Durable Goods, Chicago PMI, and Consumer Sentiment. 

After the last jobs report and FOMC Minutes (which can't be emphasized enough as NOT having been informed by the jobs report), there are precious few arguments to be made for another move lower in rates at the same pace seen heading into the end of October.  Given that the December 6th jobs report has the market's permission to cast a vote for Fed policy change, we'd need to see more than just a little bit of weakness in order to justify much progress. 

Charts

Fannie 3.5 MBS and Treasury Futures (gives us a good way to compare price vs price).  The two are typically well correlated but clearly broke apart yesterday.  This sort of divergence is rare, but in this case, doesn't mean much on this holiday week.

Consumer Confidence "Labor Differential" compared to official unemployment figures from the BLS. 

This chart shows a popular sub-component of today's Consumer Confidence numbers known as the Labor Differential which is derived from two other sub-components (the Conference Board doesn't publish it's own number for the differential, but rather the "Jobs Hard to Get" index and the "Jobs Plentiful" index.  The spread between the two is the Labor Differential and acts as one of the many pieces of early anecdotal pieces of evidence for the official jobs report  With the importance of the upcoming instance, any significant movement in the differential could be bigger news than the headline itself.