Strong Start Reinforcing Lower Range Ceiling

The previous week ended with bonds on the run and yields threatening to break up and over the 2.85% technical level.  That breakout was somewhat inconclusive by Friday afternoon as a modest rally resulted in levels of 2.849% at the 3pm CME close.  The same ceiling was tested again in the overnight session, but buyers jumped in fairly quickly with gains ramping up into domestic hours.  All of the above builds the sense that last week constituted a failed breakout attempt and that 2.85% can continue to stand as a supportive ceiling until proven otherwise.

If 2.85% is the ceiling, 2.82% would be like the ceiling fan for bond bulls.  In other words, staying below 2.85% would be good, but 2.82 would be even better.  In fact, since late July, there's been more frequent technical support at 2.82% whereas 2.85% has only seen a few instances of overrun.  As far as bond bears are concerned, yields have been in a fairly linear uptrend for most of August, and we're currently close to the lower boundary of that trend channel.  As such, we might want to keep an eye on 2.76% for bounce potential at the beginning of the week.