The Day Ahead: Market Theme to Shift From Fed to Holidays

With the relatively extreme importance of a Fed meeting that fell on December 16th, it was easier to overlook the fact that Christmas is next week.  For me personally, even though I could have told you if you'd asked me, I didn't much think about it until the emails started rolling in yesterday.  "I will be out of the office starting ______ and returning on _______.  Happy holidays!"  That kind of email (or auto-responder).

It's worth mentioning that for all the talk in the news over the past few years about algorithmic trading, and despite what you might assume is an environment with heavy leveraging of technology, bond markets run on human power.  Most markets do.  And when human power dwindles, trading dynamics change. 

Most traders with the latitude are either out of the office or trading in a way that acknowledges others are out of the office.  Skeleton crews are left with fairly specific instructions, and in general, trading positions are more likely to be closed than opened.  That could prove to be supportive for bond markets given the recent preponderance of "short" positions (because short positions are closed by buying bonds).

As for the economic calendar, it fully supports an early exit.  There's nothing happening apart from a speech from Fed's Lacker (not likely to be noteworthy) and an oil rig count report that will come too late in the day to be of material consequence to bond markets (1pm). 

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