Bond Market Seeks Guidance After Range Bound Session

Yowza!  What a boring day!

Remember earlier today we started talking about various technical levels in MBS, treasuries, and stocks?  101-02, 3.66, and 1166 respectively?

Here's how the day shook out:

You might think I'm calling this to your attention to set up my favorite joke about "what has two thumbs and and can predict the future?"  (then with thumbs to my chest, a resounding: "This Guy!"  Admittedly, the joke loses a bit when not told in person.  OK, ok, ok... so it loses everything, but still!).  But that's not my goal here...

My goal is to convey just how boring today was.  The term "range-bound and waiting for guidance" doesn't even begin to describe it.  "Low volatility and narrowing prices ahead of _<insert important data event here>   " barely comes close...  No my friends... Today was a day that might as well not even have traded.  It does do one thing for us though, which I suppose is useful, and that is to at least SPEAK TO, if not outright CONFIRM that what we saw on Friday afternoon was indeed a move to cash/sidelines in the late hours of the day, and not indicative of any material weakness in bonds. 

Why?  Well, just take a look at the range that bonds are starting to settle into around the noon hour on Friday (when participation really starts to die down...)  Simply put, we're right back into "HONING IN" on that same range today.  I like AQ's term as well "Coiling."  Whatever the case, all the technical levels discussed today were pretty high probability bets as all the honing, and coiling, and orbiting, (oh my!), go a long way to drawing big fat arrows (figuratively and literally) as to the general directions of prices and yields.  Connect the high's and lows.  Then see where they're heading, and there we are. 

All that changes (probably) tomorrow with the 2yr tsy auction.  Even that little guy isn't going to pack the punch of 5's the following day as far as the longer end of the curve (the one MBS care more about!) is concerned.  In other words, things should get more interesting as the week progresses, starting tomorrow!  See you then.