MBS Live Day Ahead: Today is The First Push Back. Ask For More Proof

Today is shaping up to be the first push back against the current selling trend.  By current, I mean the sharper, shorter trend of the past 7 days as opposed to the longer-term trends that began in late 2016 and 2012.  This current trend is responsible for ending the friendly Springtime consolidation that helped rates stay steady to slightly stronger throughout March and early April.  It also happens to have taken yield to new 4-year highs and is within striking distance of 6-year highs.

As we discussed yesterday, when selling trends go on for more than 5 days (that's 5 days of yields moving noticeably higher), their respective clocks are ticking.  Some--like this one--go on to a 6th day of selling.  A few make it to 7 days.  8 day selling sprees are a rarity, and anything more than that is almost never seen.  In other words, we knew we were getting close to 'bounce potential.'  

While today's bounce is obviously more enjoyable than the alternative, it's important to keep it in perspective.  First off, consider that we're going to be "happy" to see rates "fall" back below 3%.  The other side of the coin is that if you'd told us that rates would be 2.98+ this time last week, we would not have been happy.

Perhaps more important is the implication of the bounce for additional gains.  Specifically, there is none!  Sometimes these bounces pan out.  Other times they don't.  It's a good idea to ask this rally for proof of its staying power before getting too attached.  There are too many past examples of similar moves that only last a day or two.