Financial securities have a tendency to alternate between periods of movement and consolidation. Obviously, if something isn't moving higher or lower, then it's sideways. What isn't always obvious (in many cases, not until hindsight comes into focus) is whether the sideways consolidation is a pause before continuing in the same direction, or a pause for consideration before reversing.
The current risk for bond markets is that yesterday's weakness following 7 days of strength is the first step in such a reversal, but we'd have to see more weakness in order to confirm that. In fact, the levels at which markets chose to find their footing yesterday (or '' to meet resistance' in the case of stocks) definitely leave open the possibility that the counter-trend moves were merely a pause before continuing on with last week's moves.
All this says nothing of the probability that yields now hold under the teal line in the chart above, but the point is that the option remains on the table. In other cases where it's been broken for more than a few hours, yields have gone on to the highest levels in the recent range.
The final option to consider is that tomorrow is the last full trading day of the week, and that we could simply see sideways indecision into the early close on Thursday. In fact, that may be something of a baseline scenario with the week's moderately important economic data helping to pull trading levels away from said baseline. While Thursday's Philly Fed is the most capable in that regard, there are reports that can't be discounted today and tomorrow.
This morning's 8:30am data includes 2 of them: Consumer Prices and Empire State Manufacturing. Neither of these reports are typically up to the task of being standalone, standout market movers, but if they both suggest the same move (i.e. higher CPI and stronger manufacturing suggesting weakness), it's certainly possible. 10am brings the NAHB Housing Market Index. This is a survey of builder sentiment that made it to post-crisis highs in the 2nd half of 2013 but has fallen back in line with 2012 highs in the last two reports. Markets tend to not pay too much attention, but a weaker-than-expected result stands more of a chance of helping bond markets than a stronger result stands of hurting.
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