With a moderate dose of weakness in the overnight session, 10yr yields have quickly found themselves on the doorstep of 1.25%--a level that marked the threshold of a fun little party over the past 2 days as yields moved as low as 1.128%.  The prevailing belief is that rates are entering another period of consolidation before making their next big move this Fall/Winter, but we're still not sure where the boundaries of that range will be.  A ceiling of 1.25% would be among the most bullish scenarios.  This looks like too much to ask for at the moment, but there is a small amount of weakness that could be tolerated without affecting the potential consolidation pattern seen in the following chart.

20210721 open2.png

In the rather likely event that weakness continues and/or that volatility proves to be higher in 2021's 3rd major consolidation, the starting point could be all the way back up at 1.42 (which was generally the lower boundary for the last consolidation).

20210721 open22.png

In the event of additional weakness today, 1.29% would be an important ceiling to watch as it's the dividing line between last week's best levels and this new, lower range.

20210721 open.png

There's nothing too earth-shattering on the calendar--not that calendar data has been the main source of inspiration in the first place.  The best case for causality will be the 1pm 20yr bond auction.  Even then, if the market has decided to correct to higher yields, it likely won't be swayed by a strong auction.


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
101-21 : -0-05
Treasuries
10 YR
1.2680 : +0.0590
Pricing as of 7/21/21 9:23AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Jul 21
7:00 MBA Purchase Index w/e 273.3
7:00 MBA Refi Index w/e 3361.5
10:30 Crude Oil Inventory (ml) w/e -4.466 -7.897
13:00 20yr Treasury Auction *