MBS Live Morning: Treasury Auction Can Help Confirm Or Reject The New Range

US and EU yields continue to correlate fairly well.  This is a blessing and curse--sometimes both at the same time depending on the point of view.  For instance, bonds made fairly decent headway in the overnight session with an obvious boost from the start of the European trading session. 

That chart looks pretty good, but the next one (same yellow and red lines for US and EU 10yr yields respectively) tells a different story.

In the wider field of view, this week quickly starts to look like a "sideways-to-slightly-weaker" consolidation after last week's rout.  Some market participants are looking to today's 10yr auction for confirmation or rejection of this new trading range.  Confirmation would be any result that falls reasonably close to average demand statistics while hitting yields in the 1.91+ range.  Rejection would require an auction yield of 1.90 or less along with very strong demand statistics.  

Strong results will be doubly impressive at this point considering 10yr yields are at domestic session lows with just over an hour to go before auction results. That's not the typical pre-auction stance, especially when there's a healthy amount of corporate bond issuance in the background, as is the case today.