MBS Live Day Ahead: Technical Levels to Watch as Bonds Keep Hope Alive

Bonds are holding below what had been a yield floor since mid-October.  Yesterday raised some concern about the recently stronger trend reversing, but overnight gains have kept the dream alive.  In looking at the various "key levels" I had on my chart of 10yr yields, I thought I recognized a bit of a pattern.  See if you can see it:

I suppose it would have been more of a mental triumph if I'd kept the 1.72% line on the chart, as that has shown up on several occasions in the MBS Huddle.  That's the only other line needed to round out a perfect little Fibonacci sequence between 1.50% and the 1.95% highs. 

What does all that mean?  I'll be the first to tell you that Fibonacci lines aren't magically predictive, even though some talking heads and other pundits make it seem that way at times.  They do, however, emphasize conclusions we've already come to (a bit, anyway).  After all, these are the technical levels I've highlighted recently due to the way yields have been behaving .  The Fibonacci believer might say "and that's no coincidence, Matt!"  

Coincidence or not, we can agree that 1.67% remains a key line in the sand overhead.  I can't think of any better dividing line between Wuhan-driven market panic (the kind of panic that's good for bonds) and a return to the same old 1.70%-1.95% waiting game.  Or perhaps we should call that a 1.67% to 1.95% waiting game?!

As for today's key events, the Fed announcement is the only big-ticket at 2pm.   It will be followed, as always, by the press conference at 2:30pm.  There is a 0% chance of a rate hike or cut, but the Fed may address other aspects of its policy (repo operations and/or the balance sheet).  In so doing, they could still have an impact on bond market momentum.