Bond markets coasted into the domestic session in marginally improved territory ahead of this morning's economic data. A look at the overnight trading builds the sense that there was indeed some "pressure release" after yesterday's Fed Announcement arrived without any material changes in policy. The entirety of the post-FOMC trade in 10yr yields looks like a hang-glider being pushed off a small cliff, but who catches his balance and levels off before crashing. Stocks and bonds were unified in this leveling off movement, however, which does more to suggest a microscopic unwinding of the "great rotation" trading themes that seem to have been in play recently (money out of bonds, into stocks, general "risk-on" stuff and jives well with the 'stock-lever' being connected). Here's a chart of the metaphorical hang-glider's path so far this AM:
Note the bumpy landing! Credit technicals for initially pulling yields back up, with the bigger spike due to the better-than-expected Chicago PMI data. This series has a tendency to produce bigger spikes at 9:42am when the data is made available to subscribers (3 minutes ahead of the 9:45am official release). Bond markets have actually done a good enough job shrugging the data off to suggest intermediate-term technical ranges are strong heading into NFP. The only downside here is that the ceiling bounce this morning merely occurred at the mid-point of what we see as an upwardly sloped trend-channel. That said, there's also a case to be made for horizontal inflection points just over 2% with 1.97 on the low end. Here's a look:
The implication for MBS has been a mostly unchanged morning, coasting along the lows of the day, but still in line with yesterday's highs.
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