Bond prices and yields are improved again this morning, adding follow-through to the positive momentum we started seeing last week.  Those gains began after some precipitous losses that had wiped out two weeks of choppy gains from mid month lows.  That selling left MBS hovering around 101-00, and from a technical perspective, the beginning of the end came with the breakout of a "triangle," in essence, two converging trends.  It was the uptrend that broke early on the 24th.  But as of yesterday, the prevailing downtrend was tested in the morning, and broken in the afternoon.  Finally this morning, retested as support and it has held.

But the downtrend in question has a bit more history behind it.   This has actually been the governing downtrend for the entire month.  Breaking it suggests a test of 102-00 as the next technical battle.

Similar technicals emerge in the benchmark 10yr treasury note. Similar to MBS, the 10yr breaks short term resistance yesterday morning and darts immediately lower to test the recently important 2.80 pivot.  With this morning's gains, 2.76 is the next pivot point, which saw a lot of action on the 23rd and a big bounce on the 24th.  It will be tough to get through, but significant if it happens.

And finally, the longer term story in treasuries.  Thinking back to the best rates we can remember in October, we see a treasury market that had downtrended steadily into the lowest yields of the year.  Before getting there, note the technical resistance at 2.475.  Moving steadily downward, testing and breaking that resistance was enough of a shift in the bond market to allow 3.5 MBS coupons to trade with enough volume that some exceptional rates were passed on  to the consumer.  Naturally, the precipitous and spikey sell off scared most of the 3.5 crowd out of the market.  The moral of the story is that we have to see a bond market trading similarly to august, september, and early october in order to get 3.5's some playing time.