The Day Ahead: Economic Calendar Picks Up, Will Markets Cool Off?

Wednesday brings enough data in the morning hours that it could help shape the trading day for bond markets.  This wasn't the case on Tuesday where an innocuous Import/Export Prices report stood alone, leaving markets to the whim of tradeflows/technicals.  This ultimately resulted in nasty day for Treasuries and MBS, taking us to levels that seemed completely out of bounds as recently as last Thursday.  Last night's RECAP was a pretty good synopsis of the recent drama, and came out later than usual. 

Further losses are possible from several different technical perspectives, and we can't simply assume that "things have been bad enough!" and therefor, must soon turn a corner.  The counterpoint to that warning is that uptrends like this one tend to offer at least some measure of respite.  The current sell-off has occupied 8 sessions without consecutive closes in stronger territory.  In other words, yields closed lower on 5/8, but didn't those gains on the 9th.  Eight sessions is entering old-age for such trends.  Even if they end up forming much bigger, longer sell-offs, we usually start seeing that push back of at least a few days in the 8-12 session range.  

Producer Prices kicks off in the 8:30am time slot along with New York Fed Manufacturing (Empire State).  For reasons we noted yesterday, PPI is tuned out.  NY Fed is somewhat significant, but not top tier data.  It could be an "additional consideration," but likely wouldn't set the tone on the day.  However, if it combines with 9:15am Industrial Production and 10:00am NAHB Housing Market Index (also both 2nd tier reports in terms of movement potential), it could be just enough to offer some more meaningful guidance for bond markets.  

More likely is that we find the weak end of the range based on technicals and tradeflows and move back into the post-NFP range by a to-be-determined amount based on the balance of the week's data and headlines, in anticipation of next week's "destined to be a lot less exciting than billed" FOMC Minutes (less exciting than billed because only something unexpected could be as exciting as this data is expected to be!).