The Day Ahead: Picking Up The Pieces After Overnight Rout

It's an ugly morning.  Bond markets have done everything they can to push yields as high as possible in as short a time as possible and with as much volume as possible.  The rest of the day will be critical in determining what the technical "vote" will be as far as the longer term range is concerned.  In terms of intraday price and yield movements, that range is already seeing it's most convincing breakout since October this morning, having pivoted off a long term downtrend in yield, a long term uptrend in yield, and the 62% retracement level between the highs and lows the last 7 months all in just two days.  It's this latter level of 2.136 that we'd be most interested in holding.

There's little by way of morning data to offer much reprieve, with only Import/Export prices on tap.  Export prices are seen unchanged from last month's +0.2 and Import prices are expected to have risen from +0.3 to +0.6.  The 1pm 30yr Bond auction is probably our best chance for a more pronounced bounce back.

The only other small consolation is that MBS are not faring as badly as Treasuries this morning, not even hitting their 2012 lows, and currently down "only" 7 ticks to 102-23.