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Perhaps Tuesday felt slightly more lively due to the fact that bond markets were generally weaker as opposed to generally stronger on Monday.  Perhaps it was the appearance of slightly more volume, more discernible tradeflows, Japan back from vacay, Fed speakers, or the 3yr Auction.  But in truth, most, if not all of these things were duds.  Volume was only off the lows because Japan was back and domestic trading cut a far more narrow range in Treasuries and MBS than it did on Monday.  

China will still be out on Wednesday, but apart from that, it has all the makings of a legitimate trading day with top tier data, top tier events, and an assortment of appetizers and apertifs along the way.  Top tier economic data honors go to Retail Sales at 8:30am.  Business Inventories for December (that's a long time ago, right?!) will be out at 10am, but few will care.  The more interesting 10am event is testimony from FHA's Galante before the House Financial Services Committee regarding the actuarial findings of the MMI fund in November.  

The afternoon's top tier event arrives at 1pm with the 10yr Treasury Auction.  Given the recently more rapid evolution of the yield curve, markets may not fully show their hand (or their relief, as the case may be) until Thursday's 30yr Auction, but 10's are always important, ESPECIALLY if the awarded yield is far from expectations or if other auction metrics deviate greatly from recent averages.  Whatever the case turns out to be, bond markets are looking increasingly likely to shake off their recent nonchalance.  

In the following chart of 10yr Treasury Futures, notice prices grinding into the longer term trendline, pushed down for 2 months exclusively under the 21-day moving average (that doesn't happen much... last time was late 2010).  Tuesday showed us that there's plenty of room to play around between the moving average and the longer term support (lower yellow line), but a break higher or lower is increasingly likely.

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