Positional Support Keeps Rates Rally Intact. Benchmarks Teetering on Breakdown

10s have largely been able to elude the brunt of three bond bearish data sets this morning thanks to month-end index extension needs and previously placed positions, but we're not seeing much follow through or intent to extend yesterdays rally either.  We're actually teetering on a breaking point at the moment. One that needs to hold.

10yr futures are currently testing the base of yesterday's rally, where volume accumulated as new long positions were added and rates really dipped. Now those traders are attempting to defend that position. If this support level fails we could see 10s jump back to the high 3.40s.

Zooming out a bit...3.40% is a highly trafficked pivot in cash 10s. We targeted 3.31% into the new year, but after seeing how fast profits were booked when 10s crossed through the 3.36/37% cluster of technical pivots yesterday, we're less hopeful about hitting 3.31% before 2pm tomorrow. You never know though. If 3.40% support holds, liquidity is lite enough that we could see a gappy jump back down to 3.31%.

If 3.40% does not hold...well you will see reprices for the worse. It doesn't mean all that much in the big picture though. The clock continues to count down to January 7 when the December Employment Situation Report is released.

10s are already backing away from 3.40% and the FNMA 4.5 MBS coupon is 3/32 off its intraday lows.

BEWARE: LOAN PRICING IS VERY SEGMENTED RIGHT NOW. LENDERS ARE ALL OVER THE MAP. IF WE FAIL TO HOLD THE ABOVE DISCUSSED SUPPORT LEVELS YOU MAY SEE REPRICES FOR THE WORSE (Suntrust already reissued).

Positional support is all that's holding back reprices for the worse.