In spite of yesterday's Moderna vaccine news, 10yr yields managed to end the day nearly unchanged.  More impressively, they're heading into the current session in noticeably stronger territory--once again testing the 0.88% technical level.  Breaking below this floor would afford bond bulls quite a bit more breathing room, and it would decrease the risk of an impending push up and over 1.0% (something that looked entirely possible last week).  This isn't to say that closing below 0.88% is some magic pill that ensures success for bonds in the short term, but it would be another vote in favor of a generally supportive ceiling taking shape under/around 1.0%.

Indeed, yields have spent MUCH more time and energy trying to break back below 0.88% in the past 4 trading days than they did attempting to break above the .96 technical level.  Today is shaping up to be the most successful example with yields already lower than they were when I snapped the following chart.

20201117 open.png

Don't expect MBS to keep pace with today's Treasury rally (assuming some semblance of it remains by the close).  MBS are much happier to outperform when Treasury yields are rising whereas underperformance is the norm during rallies.

What will it take for 0.88% to be definitively broken?  We've already seen a reaction to this morning's Retail Sales data.  Bonds were definitely willing to react, which is nice to see for those of use waiting for economic data to reliably reconnect with market movement.  But that alone won't be enough.  Additional support would need to come from more aggressive stock selling or additional covid-related lockdown announcements.  These aren't the only potential sources of motivation, but they're probably the top two todayb.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
UMBS 2.0
103-15 : +0-05
Treasuries
10 YR
0.8700 : -0.0360
Pricing as of 11/17/20 10:03AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Tuesday, Nov 17
8:30 Import prices mm (%) Oct 0.2 0.3
8:30 Export prices mm (%) Oct 0.3 0.6
8:30 Retail Sales (%)* Oct 0.5 1.9
9:15 Industrial Production (%) Oct 1.0 -0.6
10:00 NAHB housing market indx Nov 85 85
10:00 Business Inventories (% ) Sep 0.6 0.3