MBS and Treasuries Holding Gains Into Afternoon. Stocks Move Lower Still

MBS and Treasuries continue to trade in positive territory in reasonably strong volume on what has turned out to be a good example of a "risk-off" day in general.  Guidance-givers have been in extremely short supply, leaving everyone's favorite scapegoat clearly in focus.  That guidance giver is, of course, Greece.  This time, it's the earlier rumors of a potential delay in the Private Sector Bond Swap, or rather, that Greece may not garner sufficient participation by Thursday's deadline to avoid activating collective-action-clauses which would force participation among all private sector bond-holders (forced participation = bad, as it's essentially a default, although more orderly than catastrophic).

Although Greece was quick to deny the rumors, markets are taking that with a grain of salt, as can be seen in the healthy Treasury/MBS rally.

(source: MBS Live Dashboard)

Some markets are taking Greece's denial of the rumors with bigger grains of salt than others (either that, or they're in the throws of a pronounced technical bounce in order to set up a sideways range ahead of NFP Friday), case in point, Stocks are having their worst day in nearly 3 months:

But despite the good times rolling in terms of day-over-day bond market gains, there's plenty of justification for technical resistance to further gains.  We think we're already seeing evidence of that, and entertained it as a possibility earlier this morning in a brief note on potential long term resistance from a trend channel in 10yr yields that today passes through the mid 1.93's, which happens to be right about where 10's bounced just after the noon hour.  That resistance line can be seen below in the 2-sectioned chart.  It's the lower teal line in the top section (which we left unchanged from the 10yr chart we've been tracking recently) and the only teal line in the bottom chart, which also includes the support line from the long term downtrend in yields.  Taken together, the long term rally support line and intermediate term bearish resistance line have generally been forming a triangle.

On a final note, here are a few of the pivot points we're watching in MBS.  Interesting to note that current prices are in line with 2011 closing highs.