MBS Live Morning: New Week, New Opportunities (And New Risks)

Last week was unpleasant for the bond market.  Yields tested and then broke above the technical ceiling at 1.56%, ultimately making it as high as 1.62% before leveling off into the 3-day weekend.  The new week brings new risks and new opportunities as bonds attempt to hold the line despite a condensed slate of Treasury auctions (3 and 10yr on Monday, 30yr on Tuesday).  If recent ceilings hold up through the auction cycle, it would go a long way toward setting up a range ceiling.  But any additional weakness would reinforce a new, upwardly sloped trend for rates.

Despite a recently weaker bias, there is a small glimmer of hope in the overnight chart.  It shows US bonds doing a fairly good job of holding ground despite an ongoing suggestion of additional weakness in EU bond markets (note the yellow line holding flat from Friday while the red line continues higher).