It's the middle of summertime, the middle of a month, and there's a light economic and event calendar in the US.  These are prime conditions for traders to tune out and for markets to engage cruise control until there are more compelling reasons to tune in.

Well, almost prime conditions...

There are the small matters of major policy announcements from The European Central Bank (ECB) and the Bank of Japan (BOJ) both taking place this Thursday.  In terms of underlying market movement motivation that the average citizen will never hear about, foreign central bank policy is about as big as it gets.  The ECB, especially, has been a driving force behind rates being "that much lower" over the past 3 years (their final countdown to full QE began in the spring of 2014, even though bond buying didn't officially begin until March 2015).

Most recently, ECB President Draghi's comments on June 27th kicked off a fairly abrupt correction for European and US bond markets.  Draghi strongly alluded to the prospect of the ECB tapering its asset purchase program the same way Fed speakers alluded to tapering in May 2013.  While we certainly haven't seen a move on the same scale as the taper tantrum in the US, 10yr yields remain roughly 20bps higher than they were, and they continue to struggle breaking through key resistance levels as long as European bonds are remaining under pressure.

In terms of outright levels, that "resistance" is approximately 2.30%, although 2.32% would be the number in terms of "closing" levels (the end of the day level that serves as the mark for long-term charts).  If 10's can break below 2.30-2.32, it would help longer-term momentum shift in our favor, which should result in additional gains, but a break below 2.265 would do even more in that regard.  On the defensive side, we're hoping to avoid a break above 2.42%.

To be clear: it's highly unlikely the ECB will make any formal announcements on Thursday.  In fact, it's essentially impossible.  Markets are more interested in observing any formal shift in Draghi's verbiage--the sort of shift that would indicate a formal announcement is likely in the Sep-Dec timeframe.  If we DON'T see that sort of shift from Draghi, that may be all the cue needed for bond momentum to shift back in a friendly direction.

Between now and Thursday, there isn't much going on except for scattered economic reports of 2nd tier importance.  If they give the appearance of market movement, it will likely have more to do with imbalances between buyers and sellers exaggerated by lighter liquidity.