MBS Live Day Ahead: Bonds Balancing Peer Pressure and Personal Goals

Whether we're looking at shorter-term or longer-term charts, we're left with the sense that bonds aren't very interested in following any other market in lock-step these days.  Normally, we'd see reliable correlations with something like European 10yr debt (for which, we watch Europe's benchmark, the German Bund) or even with equities markets. 

At present, the Treasury market's typical "friends" are still "hanging out" from time to time, but Treasuries are much more willing to do their own thing.  That willingness grows more evident the longer the time frame we consider.  Most recently, their "own thing" has been to lock themselves in their room, where the walls are marked by 2.91 and 2.80.  

In fact, if we zoom in to a minute-by-minute view, we can see even narrower boundaries confining 10yr yields.  They've formed an ascending consolidation pattern (upwardly-sloped, converging lines) over the past few trading sessions with a ceiling that's been pretty close to 2.855% and a steeper ascending line that we have a chance to break this morning.

Breaking below that line (and holding on the other side) implies a better than 50% chance of returning to test the more important boundary at 2.80%.  That would be a much quicker return visit (5 days) compared to last interval of 8 days (March 14th vs March 22nd).  As far as market technicians are concerned, breakouts become more likely when these return visits become more frequent. 

The only wild card is that this is a "throw-away" week to many traders due to an absence of significant data and a 1.5-day holiday closure beginning Thursday afternoon.  As such, there's a risk that any positive cues could merely be serendipitous.