Bond markets tried very hard on Tuesday to convince us that "something" is happening.  We've been more defensive than usual for over a week now and noted the break above 1.60 in 10yr yields as the first indication that "something" was up.   At that time, the highest intermediate pivot point we noted was 1.74.  Incidentally this was the highest yield seen in yesterday's session. 

That sets the stage for the intentionally ambiguous reference to "something."  With yields just hitting the 1.74 target (as opposed to bouncing convincingly or breaking through), we find ourselves in the relatively common position of waiting for the next trading day before getting enough information about the market's treatment of that technical level to know which it is (bounce or break). 

It's hard not to hear the nagging voice in the back of our own minds about the fundamental landscape and ask ourselves "has anything really changed?"  As far as a long term Euro solution is concerned, no...  And the trading levels in Euros will be the first to admit that.  But what the markets may be doing (if they're doing anything other than trying to buck off less skilled riders) is pretending to consider that some small cog in the European fail machine has improved in some small way during an opportune time when European governance is on vacation.

Are we saying this could be as simple as a "dog's away, cats will play" type scenario?  Yes, yes we are.  Because if it's NOT that, then things could get uglier.

For now, as with each incremental ratcheting movement higher in yields, we're hoping for as much support as can be mustered in the thinner August trading conditions.  Seeing 10's make a stand at 1.74 would be awfully neat considering this was sort of what we'd envisioned as an aggressive-but-logical sell-off target when the thing was getting underway.  If 10's are breaking higher during today's session, then we'll dust off the next few pivot points on the way up, but 1.80 is the first biggie.

Today's data landscape is more sparse than yesterday's, despite a greater number of domestic reports.  The sparseness comes from a relative absence of European data and relatively less important domestic data.  Empire State Manufacturing is the only thing on the radar at 8:30am and it's hit or miss (yes, we realize CPI prints at the same time, but can't be bothered, neither should you).  Then Industrial Production at 9:15 is the only other meaty piece of data on the day though the supporting actors might have their voices heard if they speak loudly.