Weaker Afternoon, But Still Uneventful

Bonds began the day in decent shape by pushing back against weakness during European hours.  MBS were briefly in just-barely-positive territory in the first hour.  Things deteriorated very slowly, but very steadily after that.  It took the entire trading session for MBS to give up an eighth of a point.  10yr Treasuries had it worse, with yields moving back up near yesterday morning's highs.  Chalk that up to ongoing "curve steepening" (fancy talk for 10yr yields rising faster than 2yr yields, and combine that notion with the fact that the average mortgage trades more like a 5yr Treasury these days). Modest volatility aside, volume and liquidity remained "holiday low."  Next week brings different risks, mainly due to the chance that some big traders will be able to reposition bond portfolios after 2024 is officially over.  These could go either way.  The bigger volatility risk won't show up until the delayed jobs report on Jan 10th.