After Friday's NFP-inspired sell-off, bond markets will be faced with the choice this week to continue to push the pace of the longer term trend higher in rates or to consolidate back toward less aggressively bad territory in that same context.  Unfortunately for bond market bulls, there's not much chance of challenging that range any time soon (considering it would require 10yr yields dropping to 1.70 this week), but stepping back from the "edge" isn't out of the question, perhaps toward one of the more central trendlines seen in the chart below.

Of course the implications for MBS may start to vary a bit at this point with the current prices on 3.0s and the current rate sheet offerings beginning to decidedly tip the balance toward 3.5 coupon production (3.75-4.25% rates).  Spreads between MBS yields and 10yr yields grew to their widest levels since QE3 in the midst of Friday's selling and if 10yr benchmarks hold remotely sideways, we could see at least some consolidative support in MBS.  That would probably start with relative MBS outperformance if Treasuries trade flat or nearly flat.

If we get some sort of broader bounce back in bond markets, and if it happens to be swift enough to net us 20bps in 10yr yields, we'd come once again to the potentially epic inflection zone centered on 1.85.  Depending on the news out of Italy in the next few weeks, a failure to break below 1.85 is the most sincere nail in the coffin of sub 2.0% rates in the 10yr.

Retail Sales and the week's Treasury Auction cycle will help frame those considerations though it bears consideration that our entire existence under 2.0% in 10yr yields has had almost everything to do with Europe and the FOMC, while having relatively less to do with the distinction between tepid and moderate domestic economic growth.  As such, we wait on Italian politics to inform the bigger picture moves with the domestic economic picture doing more of the "fine-tuning" type adjustments.  Case-in-point: the biggest of the big domestic economic data sets (Friday's NFP) only got us from a central inflection point to the edge of the long term range--doing a perfect job of avoiding the appearance of mattering more to the big picture.