Bonds are beginning the day in weaker territory for one of several reasons (MBS Live members can read about them in greater detail HERE).  The weakness comes at a bad time with respect to the progress made in the past few weeks.  We're not talking about anything apocalyptic, but we do need to be on the lookout for a short-term bounce.  It's arguably already taking shape.

From a technical standpoint, the bounce can be viewed as an inability of 10yr yields to break below 2.30+ after having stalled out there on both Tuesday and Wednesday.  That neighborhood (2.305-2.315%) had been one of our most widely-followed technical levels earlier in 2017, and for a time, was the lower boundary from the weaker 1st quarter.  After that, it played more of a pivot point role.

Some technical overlays (calculations applied to bond price/yield data resulting in lines that provide different points of view on momentum and risk) are still in fine shape.  The more sensitive, shorter-term technicals are the ones that are starting to show some weakness.  That will always be the case, naturally, because those technicals are designed to give early warnings, but at the expense of accuracy.  Longer-term technicals aren't yet sounding the alarm, but short-term technicals suggest we stay vigilant about that possibility.

If you want to forget all that technical mumbo jumbo, you can simply look at outright trading levels.  Failing to break below 2.30% is "not good" and breaking above 2.35% is "bad."  From there, 2.36 and 2.37% would be additional layers of negative confirmation.  The only catch is that a break above those ceilings could serve as a cue for bond buyers.  So save your more profound concerns for a breakout that lasts more than a day.

2017-11-9 Open

As for today, we've already seen Jobless Claims come in at 239k vs 231k, not that it matters (Jobless Claims haven't moved markets in years, and it's silly for anyone to pretend that's the case for now).  Wholesale Inventories come out at 10am and are almost equally unlikely to matter.  The afternoon brings the 30yr Bond auction, which could certainly be an inflection point for trading momentum simply because it's the end of this week's Treasury auction supply--a milestone that sometimes brings in bond buyers regardless of other motivations. 

Finally, all market participants are a bit on edge due to a likely tax bill announcement from the Senate.  Again, the provisions of the bill as they affect the economy don't matter.  It's all about how passable any given bill appears at first glance.  If this one looks like something that has a good chance of passing the House (based on pundits and interviews with lawmakers), it will help stocks and hurt bonds, most likely.  This, too, could be part of the reason we're seeing bonds hesitate to break the 2.30% floor.

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
102-28 : -0-03
10 YR
2.3398 : +0.0228
Pricing as of 11/9/17 9:26AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Thursday, Nov 09
8:30 Jobless Claims (k) w/e 231 229
10:00 Wholesale inventories mm (%) Sep 0.3 0.3
13:00 30-Yr Bond Auction (bl)* 15