MBS Live Week Ahead: Bonds on The Ropes to Begin Holiday-Shortened Week

Bond markets offered a glimmer or two of hope last week as yields looked to be leveling off heading into Columbus Day weekend.  In other words, 10yr Treasuries were operating at recent highs, but had least managed to push back in a stronger direction on Friday.  This resulted in closing levels that were in the middle of the 3-day range, thus suggesting a potential consolidation/correction was in the works.

This morning's early trading has gone a long way toward dashing those hopes.  The chart below shows how today's candlestick has "gapped out" above the potentially consolidative range seen heading into last week.

The other problem is that this further edifies the troubling uptrend seen inside the red lines in the chart.  There are plenty of additional negative anecdotes, especially in terms of technical analysis (consider the "bounce" back above the 25, 50, and 100 day moving average lines in the chart), but none of them really add anything to the fact that rates are in an uptrend.  All we can do from a market-watching standpoint is wait  and hope that the uptrend is defeated fairly soon.

With the current week starting on a Tuesday, there's less time than normal to schedule economic reports and events.  But even then, the calendar is pretty light.  Friday brings the only upper-tier reports in the form of Retail Sales and Consumer Prices ("CPI").  Treasury auctions are crammed into Wednesday and Thursday.  This adds to week's overall supply of bonds as corporate debt issuance is expected to start ramping up again.