The most defining moment of the big 2019 bond rally was undoubtedly the August 1st tariff announcement and the resulting massive reaction in both yields and volumes.  The 2 weeks that followed represented the market's attempt to price in a scenario where global trade tensions would push the US and other countries toward economic contraction. 

With the benefit of hindsight, we can look back to mid-August and observe that bonds have essentially been correcting that initial rally ever since then.  There was an early opportunity to claim the correction was complete in mid September, but we didn't need hindsight to identify that as a head fake. 

The past 4-5 weeks, however, have been more serious, with the most troubling developments seen on Thursday and Friday of last week.  That's when yields officially crossed back above the lowest yield from BEFORE August's mega rally (1.94).  With that, the August rally was officially "corrected." 

20191113 open

But all of the above assumes that the weaker trend of the past 3 months is merely driven by technical forces (i.e. an attempt to correct the huge August rally simply because it went so far so fast).  Instead, a great case can be made for markets still actively trying to predict the economic implications of real-time developments in trade, geopolitics, central bank policy, etc.  In other words, this move isn't necessarily over simply because it looks like we're bouncing off a ceiling at 1.94.  In fact, it's likely to continue unless trade talks go off the tracks or economic data takes a bigger turn for the worse.  Otherwise, short-term gains run the risk of falling into the "ascending triangle" seen in the chart above (teal lines).  

Bottom line: we had been tracking a more neutral triangle/consolidation that implied equal momentum toward higher and lower yields.  The past 2.5 weeks shifted the triangle in a decidedly unfriendly direction, but relative to the Aug/September swings, the trading range is still getting narrower as markets are increasingly able to answer the question of "what next?"  In other words, the next move is still in limbo, but it's a more bearish limbo than it was in mid October.  If we can break well below the lower teal line, maybe our limbo spirit animal will look more bullish.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
101-03 : +0-05
10 YR
1.8720 : -0.0370
Pricing as of 11/13/19 9:59AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Nov 13
7:00 MBA Purchase Index w/e 241.0
7:00 Mortgage Refinance Index w/e 2102.7
8:30 Core CPI (Annual) (%)* Oct 2.4 2.4