What The Range Breakout Means For The Outlook

With bonds seeing additional weakness after breaking above 3.60% yesterday, we could consider the breakout to be "confirmed" in a technical sense.  But what does that confirmation really mean?  We've seen similar range breakouts only for yields to move lower in the next trading session.  We've also seen them at the start of even uglier trends.  Fortunately, the current range and its associated breakout arrive at a time where the outlook is fairly well understood.  We're still waiting for a sweeping verdict on inflation and growth--one that will take weeks if not months.  This week's trading merely showed us the market is willing to entertain that the verdict isn't guaranteed to be rate friendly.

Market Movement Recap
09:34 AM

Weakness on top of more weakness.  10yr up 6bps to 3.711.  MBS down a quarter point. 

11:43 AM

Bouncing back as Powell speaks and also potentially due to other headlines (Yellen on banks, and debt ceiling impasse). 10yr now down 1.1bps t 3.64. MBS down an eighth of a point.

02:18 PM

MBS bouncing back despite a bit of selling in Treasuries.  UMBS 5.0 down only 6 ticks (.19).  10yr up 2.9bps at 3.68.

04:12 PM

MBS slumped a bit heading into 4pm with 5.0 coupons down 10 ticks (.31) at times, but only a quarter point currently.  10s were selling all afternoon, but bounced slightly and are now up only 3.9bps on the day at 3.69

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