Fed day tomorrow!  We'll finally get to see what's what with respect to recent speculation and a factual shift in tone from several Fed members (including Powell).  But we have a day and a half of trading to get through before that happens.

As today's trading ramps up, we're seeing starkly clear confirmation of the consolidation range that I can't stop talking about over the last week and a half.  The boundaries are now clearly set at 2.92% overhead (successfully defended as a ceiling on Wed/Thu last week) and 2.82% (which has offered several floor bounces starting on December 6th).

2.82% is highlighted on the chart because that's the boundary we're closer to this morning.  In fact, yields bounced there in the overnight session, and from a purely technical standpoint, that doesn't bode incredibly well for the rest of today's momentum.  The suggestion is that yields will retreat back into this well-established range and wait for tomorrow's Fed events to vote on a breakout.

Beyond today's trading, the momentum technicals are decidedly 'overbought,' which increases the risk of an unfriendly bounce.

2018-12-18 open

None of this is to say that rates couldn't break below 2.82% and continue rallying after the Fed.  It really depends upon what the Fed says and how they adjust their rate forecasts.  Rather, the technicals simply suggest that--all other things being equal--there is more latent momentum waiting to push yields higher versus lower.  That's worth considering for those who are on a fence with respect to lock/float strategy heading into tomorrow.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.0
101-09 : +0-02
10 YR
2.8530 : -0.0040
Pricing as of 12/18/18 9:56AMEST