Midday Commentary: Bonds flat on month-end window-dressing, possible government shutdown

By Cristal Cody

Tupelo, Miss., Sept. 30 - Investment-grade bonds held mostly unchanged early Monday as Treasuries ticked higher on flight-to-quality trading ahead of a potential U.S. government shutdown, market sources said.

"Looking ahead, we may see some volatility in credit spreads on the back of budget discussions, but this widespread belief is that this will be a short-term phenomenon," RBC Capital Markets, LLC analysts said in a note on Monday.

The Markit CDX North American Investment Grade series 21 index ended Friday 1 basis point wider at a spread of 81 bps.

Traders expect most of the day's activity to center on month-end window dressing.

Market activity over the week likely will focus on a heavy round of economic data, including the September jobs report that will be released on Friday, sources said.

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