• MBS Close up 9 ticks at 100-30. CC yield at 4.366%. Yield Spreads Much Wider into Close.
  • 10yr yields down around 10bps at 3.6
  • Both markets at or near LONG term resistance.
  • known unknown: how much of the volume is here for organic economic factors vs. Greece et. al.'s flight to safety?
  • NFP will be telling
  • Until then, nothing new is confirmed.  (or rejected for that matter)

Groggy Monday originatin' eyes opened to some healthy gains this AM in both MBS and treasuries.  By 10am eastern, we'd touched what would prove to be the highs of the day using 3pm marking as the official close.  Markets drifted a bit higher in price after that, but it's clear from the charts what levels bonds were targeting and what time they would be hit.  Probably a good idea to look at those charts, eh?

And in case you don't remember these levels from blogs of bygone days and are asking "so what?", allow me to retort.

Guess what...  What 10yr yields HAVE NOT MEANINGFULLY BROKEN CURRENT LEVELS ALL YEAR (since mid December 09), it's time to get really ready to lock.  Similarly, when MBS move over 100-28, IT HAS BEEN A PROFIT TAKING SIGNAL SINCE LAST SUMMER, and recently, that signal has only made it as high as 101-05, which is not even a quarter of a point away from current levels.

The point is that today's rally didn't BREAK any trends, and it CHALLENGES some longer standing and more durable trends at the extreme limits of short, medium, and even longer term ranges (or comes close in the case of MBS).  The logic that has been serving us so well for so long dictates we're looking for locking opportunities now.  If you're a bit more aggressive on that front, some might wait for NFP to shed some light on how important the data is versus the EU drama, but to hope for the 10yr to hit 3.5 would be to bet on a bigger shift in sentiment than we've seen since mid December. 

But let's be clear... There's certainly no reason we couldn't see such a shift!  The important thing though, is that we haven't seen it yet, and the habit of "not acting like we've seen it until we've seen it," has served us better than worse for a long time.  Stocks are making that risky bet a bit more tempting by playing dead:

But are they playing?  or are they dead?  What does experience tell you? 

Listen folks... I'm just as hopeful as the next guy that stocks DO break lower and the 10yr DOES re-test 3.5 and the 4.5 DOES spend some more time in the 101's.  All I'm advocating is PATIENCE on CHANGING HOW YOU MANAGE YOUR PIPELINE until such a time as old trends are broken and we stand a better chance of heading back there than not.  In the context of recent months and even during several time periods in 09, that means a predisposition toward locking (assuming rate sheets are reflecting gains somewhat), while we're at these levels.   At the very least, extreme vigilance for changes or obvious signs of adherence to the range is in order.