It would be miraculous to see bond markets escape this week without experiencing some sort of reaction to the plethora of data and scheduled events.  From a market movement potential standpoint, respect must first be given to Wednesday afternoon's Fed events.  These include not only the Fed Announcement itself, but also the updated economic projections (aka, the "dots") and Yellen's press conference.  

Of the three, the dots (which can show changes in the pace of the Fed's rate hike outlook) could be the most important unless the policy announcement specifically addresses balance sheet reinvestments (not likely at this meeting).  For what it's worth, a rate hike IS a foregone conclusion, so traders are looking elsewhere for information.

Because of Fed day, this week's Treasury auction cycle is condensed into the first 2 days of the week.  3 and 10yr auctions will happen today and the 30yr auction is tomorrow.  We can assume traders are feeling some additional pressure from the earlier, more dense supply requirements (primary dealers are required to bid at auction).  A Treasury auction cycle typically stretches from Tuesday through Thursday.

Finally, there's the raft of scheduled economic data set to release fairly consistently throughout the week.  Monday is the only real dud of the group (unless you count the auctions, but we're talking about economic reports). Tuesday is the runner-up in that regard, with only Producer Prices at 8:30am.

Every other day has multiple reports.  Wednesday, in particular, looks impressive, with both Retails Sales and Consumer Prices at 8:30am.  The reaction could be muted given the approach of the Fed later in the day.  

While we can forgive a bit of weakness today and tomorrow as "pre-Fed anxiety," we really would need to see bonds take a positive stand this week.  If they don't, they risk confirming a negative shift in momentum.  This shift could be defined in one of several ways.  On the chart below, we could be on the lookout for any of the following:

  • a break above the middle Bollinger Band (purple lines in the upper pane)
  • a sustained break above 2.22 (followed by a move to test 2.305)
  • a break above the mid-point (dotted line) in the middle pane of the chart (fast stochastics--a short term momentum indicator
  • a continued move higher in slow stochastics (long term momentum indicator) in the bottom pane of the chart.

2017-6-12 open

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-01 : -0-02
10 YR
2.2180 : +0.0190
Pricing as of 6/12/17 9:07AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Jun 12
11:30 3-Yr Note Auction (bl) 24
13:00 10-yr Note Auction (bl)*
Tuesday, Jun 13
8:30 Producer Prices (%) May 0.0 0.5
8:30 Core Producer Prices YY (%)* May 2.0 1.9
13:00 30-Yr Bond Auction (bl)*
Wednesday, Jun 14
7:00 Mortgage Market Index w/e 430.6
8:30 Retail sales mm (%)* May 0.1 0.4
8:30 Core CPI Year/Year (%)* May 1.9 1.9
8:30 CPI mm, sa (%)* May 0.0 0.2
10:00 Business inventories mm (% ) Apr -0.2 0.2
14:00 FOMC rate decision (%)* N/A 1.125 0.875
Thursday, Jun 15
8:30 Import prices mm (%)* May 0.0 0.5
8:30 Philly Fed Business Index * Jun 25.0 38.8
8:30 NY Fed manufacturing Jun 3.75 -1.00
8:30 Export prices mm (%)* May 0.1 0.2
9:15 Industrial Production (%)* May 0.2 1.0
9:15 Capacity Utilization (%) May 76.8 76.7
10:00 NAHB housing market indx Jun 70 70
Friday, Jun 16
8:30 Housing starts number mm (ml)* May 1.215 1.172
8:30 Building permits: number (ml)* May 1.247 1.228
10:00 Consumer Sentiment Prelim Jun 97.0 97.1