Remember the end of July?  We were worried that an entire month of gains in bonds could give way to a momentum shift in August.  It did.  September brought a recovery.  It wasn't as bullish as July, but it was a sideways-to-slightly-stronger theme nonetheless.  October was almost a carbon copy of August in terms of negative momentum.  Once again, the negativity cooled off in the following month (the one that just ended) with Treasuries ending up in slightly better territory versus October 30th. 

With seemingly serendipitous weakness this morning, is recent history (like that of August or October) repeating?  Too soon to tell, of course, but never too soon to consider!

All of the above is frustratingly difficult to follow based on prose alone, but today's chart makes it easy to see the shifting themes from month to month.  The chart also adds the negative trend channel that's been intact since August.  Today's spike means yields are also bouncing right at the bottom of that trend channel.  That adds some emphasis to the negative shift.

So are we doomed?  Not necessarily!  Yes, it's far more likely that we'll see 10yr yields over 1% in the coming months, but nothing that's happening this morning guarantees it.  All of the above is offered as a heads-up about the risk of history repeating itself.  Even if it does, the way things play out in the mortgage market could be a very different story. 

The spreads between mortgage rates and MBS are still so excruciatingly wide that bonds could lose A LOT of ground before rates would necessarily be forced up into the 3% range.  The more gradual the weakness in the broader bond market, the less reaction we'd see in mortgage rates.  To quantify this claim, roughly, I'd say 10yr yields could rise to 1.15-1.25% or thereabouts without 30yr fixed mortgage rates being much higher than they are today (maybe an eighth by the time things settled down).

Today brings two key calendar considerations with ISM Manufacturing at 10am and congressional testimony from Powell at the same time.  No fireworks are expected from Powell, but they can never be ruled out.