Whether we're talking about mortgage rates falling briefly to 4.0 after only recently breaking to 4.125% or whether we're talking about 10yr yields breaking under 2.47 after only recently making it below 2.57, bond markets are now back in the same stance from which they were initially approaching this week's important events. Using 10yr yields as a visual aid, we had a 2.47-2.57 "lead-off" range. Last week's month-end trading and short-covering rally made for a surprising break below 2.47 and now we're right back in the thick of the previous range.
From a technical standpoint, this was a logical place from which to approach the upcoming events. In being below 2.57 (2014's heretofore boundary), it was declaring itself as something more hopeful and serious than previous rally attempts. Eurozone QE is indeed more serious. But by avoiding a break below 2.47 it was also respecting a longer-term boundary as if to say "yes, this is serious, but it's not a sea-change."
The purpose of this assessment is to suggest that last week's surprising strength and yesterday's surprising weakness are a "wash" of sorts. Rather than perceive each movement as embarking on a new trend, we can simply conclude we're in the same sideways range we were for the previous 2 weeks and we're still waiting on the same data that's been hanging over the bond market for 2 months (that is, the initial big unveiling of ECB stimulus possibilities was April 4th--a day that marked a course change for bond markets).
In short, anything between 2.57 and 2.47 is 'fair game.' The week's most significant event continues to be Thursday morning's ECB Announcement at 745am ET and the ensuing press conference at 8:30am. Tomorrow's calendar is plenty respectable and could easily stoke another "lead off" that makes it seem like the range will break in one direction or the other. That leaves today with it's relative lack of interesting calendar items. All things being equal and barring surprises, we'll just be hoping to hold that same old range.
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