Token Year-End Volatility
Summary:
On December 31, 2025, financial markets experienced heightened volatility due to year-end trading activity, particularly in bonds and mortgage-backed securities (MBS). The shortened trading session saw fluctuations driven by jobless claims data and institutional traders closing positions before the 1pm ET cutoff. While the volatility spike was within normal year-end ranges, it highlighted the impact of liquidity dynamics and macroeconomic data on fixed-income markets. This event matters to traders, investors, and analysts monitoring year-end portfolio rebalancing and market sentiment.
What This Means for You:
- Monitor liquidity windows: Expect increased volatility around 1pm ET during year-end sessions as large traders exit positions.
- Contextualize data spikes: Short-term yield movements (like the 10-year Treasury’s 3.4bps jump) may reflect technical factors rather than fundamental shifts.
- Adjust MBS strategies: Mortgage-backed securities showed .125-point swings—consider tighter stop-losses during thin holiday trading.
- Watch January follow-through: Year-end price action often reverses in early January; confirm trends before committing to new positions.
Original Post:
Token Year-End Volatility
Wed, Dec 31 2025, 1:24 PM
Token Year-End Volatility
Wednesday’s shortened session offered more excitement than the first two days of the week. There was a modicum of legitimate data-driven selling this morning in response to the jobless claims data. Bonds had trudged most of the way back toward unchanged levels by 1pm ET, but volatility picked up again at that point. While 2pm is the official early close, 1pm is the cut-off for many of the largest traders to close out their year-end positions. This makes for a big spike in volume at that time, and it can also result in a quick jolt to prices/yields. As far as year-end jolts go, today’s was pretty normal and should not be taken as a sign of any underlying predisposition in the market.
-
- Continued Claims (Dec)/20
- 1,866K vs — f’cast, 1923K prev
- Jobless Claims (Dec)/27
- 199K vs 220K f’cast, 214K prev
- Continued Claims (Dec)/20
08:34 AM
losing ground after claims data. MBS down 3 ticks (.09) and 10yr up 2.1bps at 4.144
12:11 PM
pushing back from weaker levels. MBS down only 1 tick (.03) and 10yr up 1.5bps at 4.138
01:09 PM
Some quick year-end selling pressure. MBS down an eighth and 10yr up 3.4bps at 4.158
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Extra Information:
Year-End Rally Explained – Contextualizes seasonal trading patterns mentioned in the article.
Federal Reserve Interest Rate Data – Official source for tracking Treasury yield movements like the 10-year note’s 4.158% close.
CME Treasury Market Profile – Details institutional trading cutoffs affecting 1pm ET volatility.
People Also Ask About:
- Why do bond markets close early on New Year’s Eve? – To accommodate institutional settlement cycles and global market holidays.
- How does jobless claims data affect MBS prices? – Strong labor data (like the 199K print) typically pressures MBS by raising rate hike expectations.
- What’s considered normal year-end volatility? – Moves under 5bps in Treasuries and .125-point MBS swings align with historical norms.
- Should retail traders avoid year-end markets? – Thin liquidity amplifies risk, but disciplined traders can capitalize on exaggerated moves.
Expert Opinion:
“While today’s action appears technical, the 10-year yield holding above 4.15% post-volatility suggests the market is pricing in sustained Fed restraint. Mortgage traders should watch for January convexity hedging flows that could extend today’s MBS underperformance.” – Fixed Income Strategist, Wall Street Firm
Key Terms:
- Year-end bond market liquidity crunch
- Mortgage-backed securities holiday trading patterns
- 10-year Treasury yield technical analysis
- Institutional trader position cutoff times
- Jobless claims impact on fixed income
- New Year’s Eve market volatility drivers
- MBS price action during thin volume
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