The title of the post makes things sound more serious than they are.  In fact, other than continuing to operate near all-time levels, things aren't that serious right now.  That doesn't mean that MBS couldn't keep falling and the 10yr yields might not soon be back at 2.4+, simply that this week's trading has been very calm, linear, and predictable in a broader context.  Each of the past few sessions has seen MBS repeat the same pattern of opening lower, jumping to the highs of the day, and leaking out somewhere in between the two by closing time. In Treasuries, 10yr notes have adhered to the "counterattack" trend channel discussed yesterday in an almost eerily calm fashion.  That trend continued today.

The fact that 10yr yields are back to the major, high-volume inflection point from earlier in the month doesn't mean yields are necessarily destined to break higher.  It's more an indication of "decision time."  In this case, that lines up quite nicely with Jackson Hole.  Not a coincidence.  Take a step back and just think of markets this simply for a moment:

• 10's rallied hard.  The reasons are unimportant for our purposes here.
• 10's broke 2%, a major achievement.
• 10's asked themselves, "is there reason to dip into the 1's for any other reason than to simply get the T-shirt and say we did it?" 
  
• The answer is no.  But 10's aren't sure if they want to stampede back up in yield just yet.
• 10's asked themselves what the next big potential market mover might be. 
  
• Jackson Hole seems like a good candidate, and only a week away!
• Thus began the slow, steady, measured, cold, calm, calculated, technical range trade back towards the major inflection point near the dotted red line at 3.125

A couple caveats to the above....  First, when we says "10's asked themselves," it's only because we're telling the broader story with a chart of 10's.  We could just as easily substitute the S&P Index and talk about 1100 analagous to 2% 10yr yields.  Second, don't get too hung up on specific horizontal levels.  What might look like a 2.07 inflection point one day could be 2.13 the next day.  A 6 bps range of technically pertinent levels is acceptable in a market that's moved a full point in yield in less than a month.  Besides, these things usually take triangular shapes where there are numerous technical stopping points clustered around one central point of gravity.  We might talk about the central point of gravity as 2.125 in this chart, but that doesn't mean it's "broken" if yields hit 2.07. 

Similar story in MBS where the analgous cluster would be perhaps between 103-26 and 104-06 in terms of Fannie 4.0 prices.  Almost the exact same pattern of "counterattack" has played out.  You can see that in the following chart, and we'll leave it there for tonight's little fireside chat.  Bottom line, think big picture with respect to the intraday pitchiness you might see.  Some clearer directionality should be seen not only after Jackson Hole, but also as the summer months draw to a close.