The Week Ahead: Absence of Data Makes Things Interesting

Last week was unpleasant for fans of low interest rates.  We moved to multi month highs in mortgage and Treasury rates, spending the most time at "2+ month highs" since mid-March 2012.  The ominous prospect is this: in hindsight, March 2012 was a somewhat anomalous pop higher in rates that happened very quickly and was "over" in just over 3 weeks.  Contrast that to the current iteration of bond market weakness where the initial pop higher was much more methodical, but significantly more persistent.  

The current sell-off draws on a wide variety of motivations--Fiscal Cliff mini-deal, FOMC Minutes, 2x "good" NFP reports, ECB LTRO repayments, debt ceiling extension, and other marginally "less bad" economic reports.  Whether or not this crop of market movers is either justified or destined to be long-lived doesn't matter.  To find a decent approximation of the current movements, we'd have to go back to late 2010.  That sell-off ultimately ended up being undone, but it took 8+ months to figure that out.  

Long story short, things haven't been good.  Last week, we were able to kinda, sorta, maybe able to perceive some correlation between data, events, and the corresponding market movements.  Even then, we leaned heavily on the tradeflow and technical explanations when it came time to wrap our minds around some of the more tenuous cause & effect correlations.  

In short, that's the beautiful (and potentially ugly) thing about Monday: it must rely almost exclusively on tradeflows and technicals because there's simply not much data on the calendar.  This might have the potential to be boring, but considering that Friday was the highest volume session for 10yr Treasuries since August 5th 2011, it seems unlikely that tradeflows will be able to dry up enough for us to ignore them.  With that in mind, we're curious to see if 10yr yields wish to go any higher than this (crazy to think that 10's didn't actually make new highs on Friday, no?):