In A Word:

There is no scheduled economic data releasing today.  Combine that with the 2 day Fed Meeting starting tomorrow, and the "action" (if you can call it that) is very thin.  MBS are unchanged from Friday's close.  Treasury analysts are speculating a bad week for both treasuries and MBS, but that will all depend on the reaction to the 90% assured fed decision and corresponding reaction to the meeting minutes.

The Why:

Why are we flat?  Because it's the "calm before the storm."  We've seen this the past several Fed Meetings.  The position-taking seems to occur quite early and then the days leading up to the Fed Meeting are notoriously low-volume for MBS.  Same story here.  Add in the variable of the immense amount of money that has been moved to the sidelines in recent weeks, and we have a potential flood of activity this week. 

Futures are calling for a 90% probability of status quo, but the 10% in the .25 point rise camp probably have more than one fixed income trader feeling a bit hedgy.  Here's a fantastic graph from the Cleveland Fed showing how these futures contracts have moved in recent days.  If you're wondering what you're looking at, their website is an authoritative source for Fed Futures information:

 

The Numbers:

 

6.0% FNMA is Flat (100-08)

6.5% FNMA is Flat


 

The News:

  •     No News 

Conclusion:

 We'll have to watch the market action unfold today and tomorrow morning in order to get a sense of market direction.  The main item of concern is the very low trading range of the Dow.  At levels under 12k, there is a high technical force being exerted in favor of a rebound.  It is rare that we see stocks and bonds improve at the same time, however, historically, the chances of this are better than average following Fed Meetings.  The fact that so much money has been moved to the sidelines recently seems to lend support to this.  Whatever the case, we find ourselves again in the position where floating is moderately risky and locking is moderately safe--sort of middle of the road territory.  But this advice is only good for today.  Come tomorrow, the swings can be violent.  Treasuries and MBS are tracking fairly well with each other again, so the treasuries are a reasonable place to get cues about potential price changes.  But as always, check back here frequently to make sure that is still the case if you are getting the urge to lock.