Friday started simply enough with MBS and Treasuries relatively in line with Thursday's latest levels, but bond markets soon began giving up ground steadily. The moves were driven primarily by tradeflows and technicals. Both MBS and Treasuries retraced precisely to Thursday morning's "battleground levels" (the point at which trends of higher lows and lower highs collided) before bouncing back into safer territory.  A similarly technical rejection occurred for the S&P just under 1525 at the same time, helping facilitate the bond market ground-holding. Then at 2pm, news that Wal-Mart execs were downbeat on February Month-to-Date earnings, send stocks plunging and helped bond markets claw back a good portion of losses. 10yr yields were within a bp of "unchanged" by the 3pm close and MBS were only 2 ticks off Thursday's latest levels.

Those closing levels that ultimately fell in line with previous closing levels, speak to the recently more subdued environment.  Unfortunately for fans of low rates, the trading range has "consolidated upward."  In other words, day to day changes in rates have been smaller and smaller, but still trending higher.  We've visited and revisited this concept most mornings with the long term 10yr Futures chart which continues to hold between a declining line of support and the 21-day moving average.  Here it is after Friday's trading.

As we noted, Friday stood a decent chance to leave the recent monotony unbroken before the 3-day weekend, and it didn't disappoint.  The thought was that this week's FOMC Minutes would be fairly important, considering that the last round of FOMC Minutes on January 3rd was also fairly important.  Those were the Minutes that showed slightly less cohesion about the continuation of QE--one of the few game-changing instances of Fed Minutes since QE1 (to whatever extent a game-changer can exist with thresholds built right into the statement!).

Whatever the case may be with respect to the current iteration of Minutes vs the last, we at least know that the Fed is one component of the "low rates equation."  Given that these will be the first Fed Minutes from a meeting with the new 2013 voters, it would still be interesting, and likely be enough of a "wait and see" event to contribute to the consolidation pattern seen above (and on rate sheets). 

The two mid-week days contain the lion's share of the remaining data with Producer Prices, Housing Starts and Building Permits joining FOMC Minutes on Wednesday.  Jobless Claims, Consumer Prices, and the Philly Fed Index hit on Thursday, with no significant data scheduled for Friday, and only the NAHB Housing Market Index set for today, and expected to tick up from 47 last month to 48 in February.