In the day just passed, bonds weakened slightly but remained inside the recent range.  The weakness is in line with a linear trend leading to the upper end of the range following Friday's strong jobs report.   We can assume that the willingness to remain range-bound reflects the uncertainty surrounding today's key events.

In the day ahead, the market's attention will be squarely focused on Powell's congressional testimony which begins at 10am ET.  He'll be reading prepared remarks that have already been released and proven to be a big source of gains for bonds earlier this morning.  Whereas yields were pushing up and out of the recent range overnight, the Powell speech easily brought them back in line.  

It could be the case that traders already have what they wanted from Powell without needing to hear it off the cuff in response to a congressional question.  But Powell could just as easily let something slip about rate cuts being far from guaranteed, or worse yet, that he thinks markets are overestimating rate cut odds.  The range of possibilities is generally outlined below.  2.07 and 1.975 have been the key levels for the most recent stint of recurring highs/lows.  But given that we're beginning the day much closer to 2.07%, it would make more sense to treat 2.12% as an upper baseline in the event of serious selling pressure.

2019-7-10 open2

The Fed will also release the minutes from its most recent policy meeting at 2pm.  After hearing what Powell has to say in the morning, there's likely not much else that the minutes will be able to offer apart from a modest course correction.  The 10yr Treasury auction at 1pm can also move the needle to some extent, but wouldn't be a range-breaking event unless it comes out exceptionally strong/weak.  Even then, we'd need to be pretty close to a range boundary for that to occur.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
100-25 : +0-07
Treasuries
10 YR
2.0460 : -0.0100
Pricing as of 7/10/19 9:14AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Jul 10
7:00 MBA Purchase Index w/e 269.3
7:00 Mortgage Refinance Index w/e 1925.6
10:00 Wholesale inventories mm (%) May 0.4 0.4
10:00 Powell Congressional Testimony *
13:00 10-yr Note Auction (bl)*
14:00 FOMC Minutes *