Global bond markets have been on the run since June 27th, when Mario Draghi (head of the European Central Bank, or ECB) said deflation was being replaced by reflation and that the economy is now seeing "upside risks."  Even the ECB meeting minutes released last week confirmed conversations were finally underway regarding a shift away from an accommodative bias.

While the EU taper trade could rear its ugly head at any moment, we're now seeing our best case for a reprieve.  ECB officials have been silent in the run up to their big policy announcement on July 20th.  Meanwhile Fed officials have been dovish.  The latest dove is Yellen herself, whose prepared remarks for today's congressional testimony sparked a rally at the open.

Whereas the past 2 days of relative stability didn't mean much in the bigger picture, a third, stronger day of gains today would go a long way toward suggesting bonds are ready to bounce here after the late-June ECB-inspired sell-off.  Short-term momentum indicators would shift back under "oversold" levels.  Technical analysis suggests this is a sign of more gains to come.  

Of course this all depends on how the rest of the day goes.  We still have Yellen's testimony to get through at 10am, and then a 10yr Treasury auction at 1pm.  For now though, the day is beginning in a very friendly way.

2017-7-12 Open