The next two days are potentially the biggest so far this year for bond markets.  The key issue will be the European Central Bank's policy announcement.  At this point, the word on the street is that there's an extremely high likelihood of rate cuts, a low likelihood of outright asset purchases and a decent chance of a more middle-of-the-road liquidity measure (like the previously used LTROs or "long term refinancing operations").  As to what combination of potential tools will result in which direction of bond market movement, it's anyone's guess. 

There are too many possible combinations and not enough consensus on what the winning combo might be.  Add to that the fact that markets have clearly traded with anticipation for at least SOMETHING to happen tomorrow, but have also clearly been trading for other reasons as well.  Just like when experts couldn't agree on what the actual net effect on rates was from QE, we can't know what amount of easing is already priced in to bond markets as we consider potential European QE now.

Today's data certainly didn't seem to matter as much as normal.  Bond market movements were HIGHLY technical in nature--meaning they look more like they were scripted by a machine than by human emotion and reason.  In general, trading simply leveled off near yesterday's latest levels.  That's the best performance of the past 4 sessions, but unfortunately rates have been moving up at a healthy clip during that time.  Still, it's better than a sharp stick in the eye, even if only slightly.

This sort of mechanical "leveling-off" is one of the two main moves we see ahead of big data.  It's the bond market's way of saying "OK, the parade is about to start, and we think we found our seats."  At 2.60+ in 10yr Treasuries, these particular seats are right on the upper edge of the road that yields have been traveling since April.

2014-6-4 trend review

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
97-29 : +0-02
FNMA 3.5
102-07 : +0-03
FNMA 4.0
105-13 : +0-03
2 YR
0.3987 : +-0.0003
10 YR
2.6039 : +0.0109
30 YR
3.4388 : +0.0048
Pricing as of 6/4/14 4:55PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:57PM  :  ALERT ISSUED: Liquidity Getting Thin (What Does That Mean?); Prices Sliding Again
12:28PM  :  Support Holding; MBS Bouncing Back For Now
10:19AM  :  ALERT ISSUED: Negative Reprice Risk Increasing Now
10:12AM  :  ALERT ISSUED: Bond Markets Weaker After ISM Non-Manufacturing Data
8:30AM  :  True to Form, No Major Impact from Weaker-Than-Expected ADP Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  ""Traders said hedge funds and dealers have been sellers of Treasury bonds. Some traders said part of the selling was linked to hedging on new corporate bond sales. Companies and banks tend to sell Treasury's to hedge the risk of higher borrowing costs when they plan to sell new bonds."- WSJ"
Victor Burek  :  "looking much like the last couple days..weakness, rally back, then even more weakness"
Christopher Stevens  :  "oh yea"
Andrew Horowitz  :  "The imminent collapse of the financial market as we know it"
Christopher Stevens  :  "what the hell did we talk about before QE and the Fed"