MBS Live Day Ahead: Robust Day of Econ Data and Corporate Earnings

Bonds continue to be well-contained by the prevailing consolidation range--a series of higher lows and static highs that's been in place in its current form since mid October.  A big break outside that range could serve as a cue for sustained momentum in the direction of the break.  Think of such patterns as the bond market's way to pause and reflect before choosing the direction of new momentum.

As for the underlying data and events that could spark such a breakout, this morning's econ data is the most robust of the week with Philly Fed, Jobless Claims, Import Prices, Builder Confidence and the headliner: Retail Sales.  But even this line-up isn't up to the task of generating enough bond movement to break the range (update: the data just came out and indeed, bonds are little-changed since then).

That leaves us to guard the same range boundaries and technical levels we've been guarding.  In terms of 10yr yields, 1.82% is on the radar as the closest overhead ceiling.  Cases could be made for 1.85 or 1.88 after that, but there's not an important ceiling until 1.95%.  

Apart from technicals, the equities market may end up pulling some money out of the bond market if earnings season continues firing on all cylinders.  So far, stocks have been able to noticeably depart their recent uncertainty-driven tango with the bond market, but bonds can only take so much of the blue line moving higher before they feel compelled move in the same direction.