Heading into the noon hour, MBS and Tsy weakness have persisted, but we met with important support at previously important levels.  This is a clearcut vote in favor of the much-discussed range trade. 

  • FN 4.0's  .....   -0-04   to 99-23
  • FN 4.5's .....    -0-04   to 102-02
  • US10YT .....    --0-03 up to 3.291
  • 2's v 10's ....    260.5 bps
  • Volume  .....    slightly above average

Though MBS are at 102-02 at the moment, the support occurred right on the 102 handle.  The range vote comes into play due not only to the "roundness" of the number,  but more importantly because it's the level that defined the top of such a long previous range with blatant tests in early october and mid november.  Play the range until the range plays you...  NFP coming on Friday, so until the range is meaningfully broken--UNLESS it is meaningfully broken, all we have is "so far so good."

The long term technical performance shown above was catalyzed by decelerating losses as 102 approached with a bounce on the level itself near the 11 o'clock hour.  Yet again, movements have adhered to a trend channel (parallel limits of decreasing highs and lows), but although we didn't highlight it, there is a secondary, more gently sloped trend channel specifically for today.  Can you see it?

You may have come to expect to see similar behavior between MBS and tsy's in a range trade situation.  Indeed, the day in 10yr yields exhibits similar characteristics, although we see some more aggressive tests of resistance, it eventually kicks in to moderate the range.

The close-up view in tsy's contributes to an equally significant technical picture in the long term, if not more so.  Unless you're joining us for the first time this week, it would be hard to avoid discussions on the 3.31 level.  Even yesterday I mentioned this in the close as the level coinciding with the much-scrutinized 119-29 level in Tsy Futures (TY's as opposed to Tsy's).  Just as MBS, one man's floor is another man's ceiling...

In an amazing turn of events, stocks continue to stay in their range.  Oh wait, it's not so amazing...  Oh wait...  Not amazing at all?  This just in folks!  Not amazing at all!  We'd be surprised if anything short of some beige book surprise has the potency to incite material change in the range-bound nature of stocks.  It can always happen, but there would likely be impetus to moderate back towards the range should breakage occur.  And that's exactly the case on an intraday picture this AM.

We'll keep you posted should any of these ranges look to be under serious attack.  Do please stay tuned for afternoon and PM content as we have the uncommon afternoon data event in the Beige Book.