The Day Ahead: Watching Technical Boundaries Ahead of NFP Tuesday

Yesterday

- Government reopened, bond markets rallied, S&P hit all time highs

- Fed speakers sound like no taper in 2013

- In terms of technical levels, bonds moved back into the range, right to the most aggressive edge

- Mortgage rates were near their best levels of past few weeks

Today

- No meaningful data on tap, but lots of Fed speakers

- Markets can set to the task of preparing for NFP on Tuesday

- Next NFP is only 17 days after that (1 week delay)

- Data is coming.  Expect it to matter

- Technical levels may provide a framework between now and then

Strategy

Clues provided by early overnight bullishness in bond markets were accurate in that both Treasuries and MBS returned to the ranges that had recently dominated the narrow, sideways slide that preceded the increased volatility seen earlier this week.  With the debt deal inked, that volatility was erased and we're back to the stronger edge of the range.  From a technical standpoint, there continues to be little by way of motivation to break into any stronger territory without justification from economic data.

And economic data is returning!  How many times are we able to look forward to an "NFP Tuesday?!"  Not sure, but probably not very many, if any.  Yet we have one on the way next week.  Additionally, the BLS rescheduled the following NFP to be only one-week delayed, meaning that the two jobs reports will be only 17 days apart, and have an FOMC statement in between. 

It increasingly looks like the Fed will hold off on tapering in 2013 based on recent Fed speeches.  We'll hear from several more today, and outside the technical levels and tradeflow jockeying into the end of the week, there's not much else to go on.  In terms of 10's a meaningful break of 2.59 would suggest a run at 2.55 or 2.47 (just like it would have last time, but never did).  Overhead, there's support now at 2.66-67 (just like last time) and crazy super awesome support at 2.75% (see the chart...)

Charts

Obligatory MBS chart with some quasi-analogous support/resistance levels.

Note: the reports that would have been released this week are struck-through in this calendar.