In the day just passed, the Treasury complex came under pressure on several fronts.  Trade related headlines sapped some of the safe haven demand, as did political progress in Italy.  Europe continued to have an influence into domestic hours after an ECB member commented on the market's overblown expectations for a September rate cut and additional stimulus.  Finally, a poorly received 7yr Treasury auction underscored the need for bonds to tap the brakes this week.

In the day ahead, we will keep a close eye on the levels that have coincided with bonds tapping the brakes as well as those where they have taken the metaphorical foot back OFF the brakes (i.e. short-term ceilings where bond buyers have stepped back in).  Both have become much more clearly defined this week as we've had THREE distinct bounces at almost the exact same floor.  Yields have also put in highs that are within 1bp of the same ceiling 3 times.

The levels in question are 1.44+ as a floor (1.443, 1.444, and 1.446, if you need the nitty gritty) and 1.54+ as a ceiling (more of a moving target here, with nearby highs ranging from 1.53 to 1.55).  The risk is that 1.44+ is making a case for a longer-term floor.  We can keep an eye on the nearby overhead ceilings for initial confirmation and longer-term momentum technicals for additional confirmation.  The chart is only suggesting possibilities for now--no reason to panic yet.

2019-8-30 open

There is econ data on the calendar today, but it's unclear how willing bonds are to trade it.  Geopolitical and trade-related headlines have been the bigger market movers of late.  Moreover, it's the Friday before Labor Day weekend (takes a toll on staffing levels in the bond market) AND month end.  While most traders with month-end trading needs will have done their best to get those taken care of before today, the hard deadline (3pm ET) always brings some additional random volatility.  All that to say, unless we're clearly blowing through the floor or ceiling, it will be next week that has a bigger say in the direction of the next move.


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
101-26 : -0-01
Treasuries
10 YR
1.5200 : +0.0040
Pricing as of 8/30/19 9:16AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Friday, Aug 30
8:30 Core PCE Inflation (y/y) (%)* Jul 1.6 1.6
9:45 Chicago PMI * Aug 47.5 44.4
10:00 Consumer Sentiment (ip) Aug 92.1 92.1
10:00 Consumer Inflation Expectations (1yr) (%) Aug 2.7
10:00 Consumer Inflation Expectations (5yr) (%) Aug 2.6