With GDP living up to it's surprising potential, things have quickly gotten more serious for domestic bond markets.  Before yesterday, econo-bears could hold out some hope that Q2 GDP might have reiterated the gloominess of Q1 GDP in some way.  They could hold out hope that Q1 weakness was about more than just the list of "excuses" that had come under increasing amounts of fire as Q1 GDP kept getting revised lower.

To whatever extent that Q1 gloominess and Q2 hope played in to recent strength in rates, yesterday stands a chance to become a fairly large-scale turning point.  In fact, yesterday began the process.  Here's visual evidence of that with the shifts in all the mainstream technical indicators for Treasury yields.

The only saving grace is that the process could still be disrupted if
NFP comes in too weak, or over the longer run if European bond markets
continue to slide.

With NFP being tomorrow, where does that leave today?  Keep in mind that it's the last day of the month, which can serve to motivate some extra demand for Treasuries as money managers rebalance their portfolios.  As we noted on Monday, some of this "month-end" buying may have already come in, but there could be more.  In fact, there will certainly be more, but that's no guarantee it would be enough to offset other trading motivations.

The best we can hope for from today is that it will give us clues as to how bond markets are feeling about this potential long term bounce.  Using the levels in the chart above, if we see 10's vehemently avoid moving below 2.52, that would be a clue that a bigger picture bounce remains a good possibility.  If, on the other hand, 10yr yields are vehemently refusing to break above 2.56, the clue would speak to hesitation over the long-term bounce.

Of the two data-sets out today, Chicago PMI at 9:45 is the more potent market mover.

By way of an interesting talking point in the wake of GDP, let's look at the reaction in stocks as well.  There was some confusion and speculation yesterday as to why stocks would move lower after such a strong GDP showing.  The speculation--and it's probably right--is that the stronger data could accelerate the Fed's process of removing policy accommodation.  The most clear and present danger was in the immediate future at the time.  The FOMC Announcement perhaps stood some small chance to include something about an accelerated rate-hike timeline.  When it didn't, both stocks and bonds breathed a sigh of relief, thus confirming the morning's speculation.