The Day Ahead: Last Call For EU to Shake Things up Before Tomorrow's Jobs Report

A few friends have mentioned that it's baseball season currently, making the recent metaphorical usage of "lead-off's" in bond markets all the more germane.  So in the spirit of the season, let's continue with lead-off's.  It all begins with Rod Carew (obviously).  Carew had said ''the walking lead was essential.  The walking lead got your momentum started.''  If we didn't know that quote was in the 1989 New York Times, he might as well have been talking about bond markets over the past 4 sessions.

 The metaphorical pitcher may have checked in on Tuesday, sending us back to base in the afternoon (1.68%), but since yesterday's ADP numbers, we've walked steadily closer to the point of no return.  The trajectory between this base and the next is made clear by the prevailing trends from mid-March.  In the following chart, note that if Treasuries don't go below the teal line, they're technically NOT reentering the previous downtrend.  This could just be coincidence, but it could be Treasuries' way of being as aggressive as possible in their lead-off, without overdoing it.  

But where do we go from here?  Any more of a lead-off and we're committed to taking the next base, or trying at least.  If the last three days of this week equate to "3 outs," then we're only one down, two to go heading into Thursday morning.  The ECB Announcement is the focal point and could easily prompt another return to base (update: the statement itself didn't do the trick, so now waiting on press conference at 8:30am).  Conversely, it could be an encouraging enough wind-up to keep our walking lead going, but only so far.  While stranger things have happened, bullish eventualities are probably limited to riding the teal line in the chart above, holding out for Friday's NFP if we're to make it all the way to the next base around 1.55%.  Would that be home?

Likely technical targets for a bull run are a milder 1.609 and a more serious 1.587--from an old-fashioned horizontal standpoint anyway.  Even when considering diagonal trends, such as the longer term uptrend in rates from last summer, the lower 2-standard deviation regression line from last July's lows coincides with either 1.587 or 1.609 level today, depending on whether you chart it as a continuation from 1/1/13 or all the way through yesterday (really).  1.55 is doable, but 1.46 is a base that's unlikely to be stolen without full cooperation from Friday's NFP.  Of course there are bearish possibilities as well.  They're not as fun to talk about, but just as real, and would start with a return to 1.68.  From there, 1.70 and 1.733 feel like sturdy enough ceilings to hold until seeing Friday's data.

Obligatory MBS Chart!