Here's another one of those sessions where a big-ticket market event has lots of potential to move markets, but no obligation to do so. Since NFP Friday at the beginning of the month, 10yr yields haven't closed a single day outside the range of yields traded on that single day. The ostensible target to break that relative containment has increasingly become today's FOMC Minutes. These were probably always going to be of some extra interest to market participants because of the boat-rocking nature of the previous version on January 3rd.
The anticipation could have been mitigated, had some other event stepped up to the plate to fundamentally alter the intermediate trend higher in yields, but the biggest market mover in the interim--the ECB's LTRO repayment shocker on Jan 25th--instead served to solidify that trend. It seems that bond markets have leveled-off to a certain degree, around the 2.0% mark in 10yr yields with 2.03-2.04 acting as a fairly supportive ceiling, but 1.95 and 2.0 itself offering two versions of frustrating resistance underfoot. MBS have been "pouty" throughout that process, to say the least having recently ratcheted to even weaker levels in their characteristic "half-point zones" seen below:
The yellow lines added above show just a bit of the recent consolidation. There's some hope for "higher lows" coming off the the bottom if today manages to have a positive outcome, but the descending "lower highs" are ominous as well. Here's the updated version of broader bond markets--as represented by 10yr Treasury Futures--and the ongoing saga of containment under the 21-day moving average and above the supportive, albeit descending trendline:
This then, brings us back to the notion of "no obligation" for the FOMC Minutes to move markets. In the context of the chart above, there's plenty of room for a bit of an initial whipsaw reaction to FOMC without firmly breaking either technical boundary. In other words, the waiting won't necessarily be over just because we get Fed Minutes. It's simply the best chance we have this week. The day's other data (Producer Prices and Housing Starts) doesn't have much of a chance compared to the Minutes, so we'd expect to spend most of the morning waiting for the afternoon, or 2pm to be precise.
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