• MBS 4.5's unchanged at 100-05
• 10yr tsy yield up 0.033 to 3.8835
• In and of itself, today was relatively contained
• Yesterday was the killer with today a moderate extension
• Tomorrow's data is critical

If we forget that MBS lost about a point yesterday and that treasuries rose more than 10bps in yield, today is mild by comparison.  MBS were unchanged on the day with just over three eighths of a point trading range.  The 10yr was confined to what was mostly a 5-6bp range.  Furthermore, several of the weak trends from yesterday were ultimately broken today, however, a gentler uptrend in yields remains intact on the 10yr.

But these 2 day technicals may not matter much depending on how tomorrow's data shakes out.  If it's weak enough it could cause a bond rally that at least brings the 10yr back within the confines of it's previous 3.85 range boundary.  But the 10yr would need to do even better than that to get back on the low side of it's directional trendline. 

What does that mean? 

Simply that a horiztonal line at 3.85 doesn't tell the whole story.  There have been a series of 'lower highs" that have formed the top line of the "triangle" formation we've been discussing for some time.  The chart below shows that triangle, and that it was broken yesterday and confirmed today, all with the requisite heavy volume.

So 3.85 would be one thing--a good thing to be sure, but 3.77 is what it would take to get us back into the trend we WERE in, and data would have to be exceedingly awful to precipitate that kind of rally.  If we get neither 3.85 or 3.77, things would have to be pretty sideways and undecided in order to NOT suggest a test of 4.0.  It could go either way.