MBS Day Ahead: Bonds Run Out of Data and Events Just When Things are Getting Good

While yesterday didn't mark any ground-breaking foray back into the stronger trading levels seen in mid-April, it did end up being the first time since then that we've seen 3 out of any 4 days end green.  In other words, the last time bond markets rallied for at least 3 out of 4 days was April 14th-17th. 

This isn't really a big deal in the grand scheme of things, and a mere month without such a move is no surprise when momentum has largely been against us.  But it is "nice" at least.  Also, at the risk of not being shy enough after being bitten, it's hard not to view these sorts of changes in tone as promising developments in the struggle to bounce.

In addition to the various promising anecdotes (3 out of 4 days in the green, or breaking moving averages, or positive momentum in other technical studies), we can also plainly observe that yields broke below the consolidative 'triangle' discussed yesterday.

You might notice those yellow lines at 2.14 and 2.28.  They are there to remind us that even though yields may be challenging the more restrictive consolidation pattern, they have yet to meaningfully break the simple, plain old sideways trading range.  That's what we'd need to see--preferably a break that occurs with gusto--in order to ratchet up another click or two of optimism.

If we're to see such gusto today, it won't come from economic data, largely because there is none.  The only calendar event of note is the 5yr Note auction (no pun initially intended) at 1pm.  Even then, we saw plenty of trading yesterday where movement was occurring independent of scheduled data.  The general process of the European market close was, in fact, the biggest market mover.  Don't be surprised to see tradeflow snowballs.  Slopes are slippery in either direction.  More movement increases the prospects for even bigger movement.