Last week was volatile for bonds with trepidation heading into (and out of) the Fed Announcement.  A surprisingly strong reversal on Thu/Fri brought yields near their lowest levels since March.  As far as overnight trading is concerned, we may have found our limit for now in terms of "surprisingly strong" moves.  The week is starting out with the 1.47% ceiling giving way in 10yr yields and MBS off a quarter of a point.  This could all be a logical part of a broadly sideways set-up for next week's pre-holiday weekend jobs report on Friday.

Weakness aside, trading levels are strong in relation to the past few months.  In the week ahead, we hope to see bonds make a decision to either forge ahead toward counterintuitive lows or to retreat safely to the confines of the previous range.  It looked as if such a retreat was underway after the Fed announcement last week, but the overnight rally challenged that notion quite easily.  If 1.44% is rejected once again, we turn to a potential break of 1.53% as evidence of reentry into the previous range.

Data is moderately limited this week with housing reports being the most prevalent (interesting, but not big market movers).  PCE inflation is the biggest potential market mover in terms of scheduled data, but only if it's quite a ways off the mark.  Apart from that, the Treasury auction cycle offers an opportunity for traders to vote on whether the recent rally is too hot, too cold, or just right (thus informing the range reentry musings).

In the simplest of terms, bonds have been doing surprisingly well in June.  The next big data is the early July NFP at the end of next week.  Between now and then, we might get some small indication of how willing bonds are to continue toward lower yields as opposed to remaining more range-bound until the fall months bring more consequential data.