Today is the second day of this week's prologue.  We're getting a sense of the market's underlying biases, but we haven't yet arrived at the bigger-ticket events (namely, tomorrow's Fed meeting, Thursday's GDP, or Friday's month-end trading day).  That said, the prologue days can still be informative.  They can possibly even be cause for concern depending on how today ends up.

Why is that?  Simply put, bonds have been rallying slowly and steadily since June 16th, and now they're showing some signs of resistance--perhaps even signs of a bounce.  Of course I don't really like to use technical analysis to try to predict the future, so I'll stop well short of saying anything we've seen recently makes anything we'll see in the future more likely than anything else.  But what we can say is that the longer any market rallies, the greater the risk that it will do something other than rally, all other things being equal.

We can also say that such a reversal or course correction would make more sense and/or be more significant if it occurs near current levels.  Reason being, if a bounce is indeed taking shape, it's happening right in line with levels we identified as the floor of the range months ago.

20200728 open.png

The massive caveat here is that yields are in the .59's this morning, and that's not even remotely high enough to confirm that we're seeing anything other than incidental noise at .58%.  Moreover, we can't even be confident that the week's bigger-ticket events will really give the bond market enough information to base it's trajectory on something other than coronavirus and stimulus prospects (the chief consideration there being the implication for more Treasury issuance to pay for more stimulus).  In fact, it could be weeks if not months before it's even possible to take a strong stand on what the next phase of bond market momentum will look like after we move past what is arguably an ongoing sideways grind that continues to wait on covid clarity.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.0
103-00 : +0-05
10 YR
0.5900 : -0.0190
Pricing as of 7/28/20 8:55AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Tuesday, Jul 28
9:00 CaseShiller 20 yy (% ) May 4.0 4.0
10:00 Consumer confidence * Jul 94.5 98.1
13:00 7-Yr Note Auction (bl)* 44