10yr yields hit a long-term ceiling of 1.776 on March 30th, 2021 as bonds quickly priced in vaccine efficacy and fiscal policy.  Several sideways months gave way to a delta-inspired rally.  Political gridlock and persistently friendly Fed policy helped.  With case counts subsiding again and the Fed certain to announce tapering soon, rates are once again testing ceilings as yields cracked back up into the 1.70+ realm last week before bouncing back down.  The new week begins with that ceiling being reinforced, for now.

The first chart shows HOURLY candlesticks including the first few hours of trading in the new week.

20211025 open2.png

Here's where those technical levels fall in the bigger picture:

20211025 open1.png

While it's all well and good to talk about range ceilings remaining intact, it's worth noting that not all ranges are doing as well.  5yr Treasuries, for instance, broke past March 2021 highs long ago and have yet to make a strong case for support.

20211025 open4.png

In order for things to change, inflation expectations and/or Fed rate hike expectations would need to reverse course.  They've been highly correlated lately, both with each other and with bond yields--especially in the 5yr space.

20211025 open5.png

10yr yields are doing a better job of avoiding the suggestion of longer-run inflation expectations, partially because higher inflation has more time to damage average economic growth over the next 10 years.

20211025open3.png

The week's key data will be Durable Goods for September (Wed) and the first look at Q3 GDP (Thu).  Together with the Treasury auction cycle, the tone should be sufficiently set by Thursday afternoon.  From there, Friday's PCE data will serve as an epilogue for the week--either accelerating the existing trend or forcing it to level off. 


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 2.5
102-11 : +0-05
Treasuries
10 YR
1.6240 : -0.0310
Pricing as of 10/25/21 10:48AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Tuesday, Oct 26
9:00 CaseShiller 20 yy (% ) Aug 20.0 19.9
9:00 CaseShiller 20 mm SA (%) Aug 1.5 1.5
9:00 Monthly Home Price yy (%) Aug 19.2
9:00 Monthly Home Price mm (%) Aug 1.4
10:00 New Home Sales (ml) Sep 0.760 0.740
10:00 Consumer confidence * Oct 108.3 109.3
10:00 New Home Sales (%) (%)* Sep 1.5
13:00 2-Yr Note Auction (bl) 60
Wednesday, Oct 27
7:00 MBA Purchase Index w/e 266.2
7:00 MBA Refi Index w/e 2807.9
8:30 Core CapEx (%)* Sep 0.5 0.6
8:30 Durable goods (%)* Sep -1.1 1.8
10:30 Crude Oil Inventory (ml) w/e 1.857 -0.431
13:00 5-Yr Note Auction (bl)* 61
Thursday, Oct 28
8:30 GDP Advance (%)* Q3 2.7 6.7
8:30 Jobless Claims (k) w/e 290 290
8:30 Continued Claims (ml) w/e 2.415 2.481
10:00 Pending Sales Index Sep 119.5
10:00 Pending Home Sales (%) Sep 0.0 8.1
13:00 7-Yr Note Auction (bl)* 62
Friday, Oct 29
8:30 Core PCE Inflation (y/y) (%)* Sep 3.7 3.6
9:45 Chicago PMI * Oct 63.5 64.7
10:00 Sentiment: 1y Inflation (%) Oct 4.8
10:00 Sentiment: 5y Inflation (%) Oct 2.8
10:00 Consumer Sentiment (ip) Oct 71.4 71.4