MBS Live Week Ahead: Holiday-Shortened Week. Time For Consolidation?

Much like last week, this week's event calendar is limited in terms of top tier data and events, but nonetheless carries the potential for technical momentum.  The underlying reasons are a bit different, however.  Last week, the risk was that rates had been super flat and narrow for 2+ weeks.   The longer and narrower those sideways streaks become, the more likely a breakout becomes (obviously), and those breakouts tend to have more momentum than normal.

This week's set-up is somewhat similar to the highs in rates seen at the end of April.  In both cases, we'd just spiked to the highest rates seen in a long time and then saw one really solid day of improvement.  In the late-April case, it was that day of improvement that preceded the sideways drift.  

In this week's case, today would be the first day of a sideways drift (if that happens to be what's in the cards).

In terms of timing and the calendar, it's a decent enough possibility.  The lineup of data and events is far from intense, with Friday's Durable Goods being the only top-tier report.  That said, Treasury auctions on Tue-Thu have a chance to show traders' hands to some extent.  Friday afternoon brings an early close for Memorial Day weekend, and markets will be fully-closed on Monday.