In the week just passed, bonds rallied to new long-term low yields before bouncing on Friday.  Hong Kong protests over the weekend kicked things off on a strong note and weak global economic data on Wednesday sparked the next leg of the rally.  Thursday saw more of a momentum/capitulation move without much by way of concrete cause and effect.  Friday's reversal was credited to news of potential German fiscal stimulus (more bond issuance, not more bond buying, as it would be if it were "monetary" stimulus).

In the week ahead, bonds will get a chance to see how much momentum can build behind a technical bounce.  In other words, we've had an impressively strong move to yields that are lower than much of the market anticipated.  Has the relentless rally forced all hands?  Has everyone finally capitulated?  Whenever traders feel utterly confident that the near-term bottom is in, we should see some more meaningful momentum toward higher rates.  But until we're moving well above 1.62% and more officially, 1.79%, it's not "over."  That's simply how big the selling pressure could be if an average amount of volatility persists.  Moving back up to 1.80% would actually be quite healthy and quite good for MBS, assuming that's the extent of the weakness.

Beyond these technical considerations, the week's focal points are pretty obvious.  There are really only 2 big contenders and they're both to do with the Fed.  Wednesday brings the minutes from the most recent FOMC meeting and while we have a pretty good idea of where they stand, this is always a potential market mover.  Friday kicks of the annual Jackson Hole symposium, where we may get some additional clarity from Powell himself.