MBS Live Recap: Sub 2.80% 10yr Yields Prove to be Hot Lava For Bond Traders

If only it were October!  The costume contest at the annual bond trader Halloween bash would be easy to win with that "2.79%" costume in the back of my closet.  

OK, so I don't really have a 2.79% costume, but I can tell you that it terrifies bond traders.  Actually, I don't need to tell you.  It's pretty plain to see:

In the chart, number 1 occurred yesterday afternoon.  The tariff shock was fresh enough that traders simply scampered back above 2.80% and let things drift sideways into the close.  The 2nd attempt to break 2.80 happened overnight when there wasn't enough domestic market participation to cause much of a sell-off.  Plus, we had yet to see exactly how domestic market participants would play it.  Number 3 (or just after it, to be precise) is when domestic traders showed up for the day and whisked bond yields quickly higher.

2.836%, roughly, was the next technical stop on the line.  This was the middle bollinger band, and it also coincided with an uptrend line discussed HERE.  Once that was broken, 2.85% provided a bit of resistance before yields ultimately moved up to 2.87%--the higher pivot point that could still be considered part of a healthy consolidation for rates.

Today was all about tradeflows.  The move was very bond-market-specific, and it drew essentially no motivation from data, headlines, or other events.  It doesn't mean the recent stability is necessarily over, but it does reinforce what we already knew about recent stability: it was never likely to give way to significant move back toward lower rates without something incredibly serious and unforeseen serving as a catalyst.