MBS Week Ahead: Not Much Data For Traders to Hide Behind

Over the years, I've frequently gone back to the "limited data" theme on certain weeks where there is--well... limited data.  The reason to mention/discuss it isn't to suggest that nothing much will be happening.  Rather, it means that whatever happens will be happening in a purer form.  With less data to consider and trade around, a meaningful layer of obfuscation is removed, allowing us to see underlying, intrinsic motivations with a bit more clarity.

As the current week begins, one of the ways we could witness those more organic trading motivations would be to pay attention to how 10yr yields behave with respect to the technical shelf they reached on Friday afternoon.  It was a 2.24-2.26 range, but saw the most frequent bounces at 2.25%. 

If we see another day of solid respect for 2.26 as an upper limit, we can begin to build a strong case for a support level being carved out.  In other words, bonds could be digging in for a foothold after Friday's big slide.  Of course such a conclusion is premature, and we could just as easily be in for more pain.  If that's the case, I'd be looking for something closer to 2.34% as potential support.  If 2.34% breaks, things would start looking as scary as a mid 2013 or late 2010.

As far as the limited data is concerned, Thursday is the biggest day, largely due to Retail Sales at 8:30am, though the afternoon also brings the end of the 3-day Treasury auction cycle.