Earlier today, it looked as if MBS and treasuries were rallying with a purpose, but it was soon right back into the trend channel that began to form this AM. Once back within those confines of the red lines you'll see below on the MBS chart, support showed up at the previous session's high at 101-00, winning that level the coveted "Daily Pivot" award. Even so, the hearty bounce at 101-00 support was soon thwarted by resistance to the upside at 101-04, which we've seen quite often from horizontal standpoint recently, but which also was in line with the trend channel.
The Treasuries and stocks in the chart above show the relative disconnection of the stock lever with respect to Friday's session. An effect of Eurozone inspired FTQ and dollar strength? Or low-volume inspired idiosyncrasy? Some of both?
We already discussed the test and break of the 2 day resistance at 3.67. But what's up with 3.66? A zoom out to a wider view should clear that up. You may need to look closely, but you can see a huge pivot at 3.66 taking place around the red line.. But perhaps more importantly, a gradual trend channel toward higher rates continue to put in relevant support and resistance. Is the the shape that gradually higher rates will take?
Whether it is or it isn't may be a question that gets further information tomorrow in the form of the FOMC minutes. We already gave the lock/float considerations a cursory treatment in MBS AFTERNOON:
"it's unclear whether the market will want to move appreciably before the afternoon FOMC minutes. It would seem to SOUND good to say so, but recently, we've seen plenty of movement lead data/events in terms of pure price. So don't take anything for granted overnight, but if you wake up with all limbs intact, at least you'll likely get rates far in advance of FOMC, and then have the comparatively easy task of simply floating intraday and locking on any significant losses."
The only thing I'd add to that for the close is that when the afternoon data is the most significant of the day, it doesn't mean the AM data can't exert it's influences. Here's what's on tap for tomorrow:
7am - MBA Application Activity
830am - Housing Starts
830am - Import and Export Prices
915am - Industrial Production
1245am- Fed-Speak from Plosser
2pm - FOMC Minutes
2pm - Treasury Budget