MBS MORNING: Making A Run For The Range

• Round 2 Of Morning Data Sends Bonds Higher
• No reason to expect 10's to break 3.6.  MBS: who knows?
• 4.5's currently at 101-13 and 10s at 3.605
• Don't let charts fool you, range is narrow, and very much still a range
• Stocks Opened up slightly, and have since fallen back to unchanged
  
• Play the range until the range plays you
  

Factory Orders nearly hit expectations at 10am, coming in at 1.7% vs. a 2.0% consensus.  Not the kind of wild variance that's worthy of a range breakout.  At the same time, the Pending Home Sales Index dropped from 96.6 to 90.4, down 7.6%.  Even if we weren't already largely expecting ongoing weakness in housing data, this report also does not have the punch to suggest a break from recently established norms in the bond market.

So as the market appears to be plummeting with abandon toward 3.6, stand firm in your resolve of "playing the range until the range plays you."  In other words, if we DO get a break below 3.60, we can cross that bridge when we come to it, but until then, we should treat that, and the concomitant highs in MBS, as a nearly certain target that will be hit, bounced off as resistance, and likely to send rates back up the technical ladder to test previously established rungs.

Those rungs have been 3.625 and 3.615 of late, but this morning, 3.63 and 3.62 have been more technically relevant.  bear in mind that none of these minute differences matter much in the broader context of treasury supply this afternoon and NFP tomorrow.  The extremities of the range are slightly more informative, though.  So if we do something other than bounce and return toward the center, we'll let you know.  Unless that happens, it's the same NFP waiting game it has been all week.