MBS Live Day Ahead: Still Waiting For The Week's Bigger Events

Bond markets are starting the day in fairly similar territory to Friday's latest levels for the 2nd day in a row.  As I said yesterday, this is a precarious position because it leaves bonds right on the edge of an important technical ceiling.  In terms of 10yr yields, this is roughly 2.40-2.42% and can be seen in the following chart along with several technical studies. 

The takeaway is that we've lost a few battles recently, but the tide of the war hasn't definitively shifted against us.  Any ability to continue to hold under 2.40-2.42% (let's just say 2.41% for today) is  strong show of support when it comes to that broader momentum.  With that in mind, we could observe that 2.41 continues to hold despite a very active corporate debt calendar.  

That means corporations are issuing bonds that are competing for the attention of fixed-income investors who otherwise might buy Treasuries and MBS.  It also implies the selling of Treasuries in some cases in order to lock in the rate of return on the corporate deals (MBS Live members can read more about this concept of rate-lock selling HERE).

Today's only significant data is the Producer Price Index and it's nothing compared to tomorrow's Consumer Price Index.  In fact, it's already come and gone without a lasting market response.

Through the end of the day, we're left to watch the 2.41% ceiling and hope it continues to provide support.  Tax reform headlines also continue to have market movement potential, although the focus is now primarily on Thursday's House vote.