MBS Day Ahead: Are Bonds Seeing a Light at The End of May's Tunnel?

Here we are in the last week of May and things finally seem to be going our way (knock on wood) with respect to bond markets putting some more consistent green on the screen.  At least they SORT OF seem to be going our way in a very unsatisfying, general sense. 

Why so unsatisfying? 

There's nothing too complicated here, really.  While we may be stringing together more green days compared to red days of late, precious little has been done to challenge May's range.  Until that happens, the outlook is the same as it ever was but perhaps with a slightly higher dose of latent optimism. 

Now you may ask yourself, 'well... How did we get here?'  If there's green on the screen, why shouldn't we be happier about it?

The main reason is that it's here due to a confluence of events.  We can enumerate them if we like.  They include an ebb in May's new debt supply--both corporate and sovereign, the onset of month-end tradeflow considerations, a technical correction/consolidation in European and US debt, favorable currency movement, tradeflow exhaustion from the early May run up in yields, and whatever basket of fundamental economic events you'd like to sort through (we don't need those to justify the green).  Long story short, it's the consolidation that we began to entertain several Thursdays ago that never materialized into a full-fledged bounce.  Same idea this time, but with better execution. 

It's now the early June trading that matters most.