Everything in bond markets since May 3rd has been a blur--the bad kind--and the leading candidate to provide clarity is next week's FOMC events (announcement, press conference and member forecasts).  As next Wednesday approaches, it's a fair hope that bond markets have begun to enter some sort of final approach pattern.  While this may indeed be happening, it's been a turbulent ride, and we can't be entirely sure we won't fall out of the sky between now and then.

Given that today is the last of the week, that the auction cycle is over, and that the most significant economic data is behind us, the tentative, bullish hope is that we can at least continue to grind it out in this noisy sideways range without sustaining too much damage.  The sad thing is that we could easily explain away a move down to 2.07 in 10yr yields or a move up to 2.24 today alone, and 1.95-2.31 on the approach to Wednesday next week with the "aftermath range" as wide as 2.40-1.83 (not to mention that analysts talk about such ranges all the time only to see them broken).  There's that much uncertainty in the market.

So take it for what it's worth then, that the longer term trend in yields is miraculously still technically intact, in that we have NOT seen a second consecutive close above the teal line in the chart below.  It's also provided that sort of noisy, sideways trend we think we'd be looking for on the approach to the big-ticket events.  Fingers crossed...

Here's a zoomed in version of the same chart.  Viewed in this way, the long term trend (teal) seems more easily challenged by the most recent week of movement, and the short term trend (white) is still intact.  The disconcerting thing about the short term trend is that the only time it's been broken for more than an hour, the events in play were questionable market motivations at questionable times.  The bigger instance at the beginning of the month was the crazy forex-driven rally that eluded a solid explanation (we even said at the time that it meant nothing ahead of NFP).  Is yesterday's late Hilsenrath rally any different?  On the one hand, the last time this happened, it was legit.  On the other, it seems like markets traded the headline of the story without reading the text, so the jury's out.

Not to be left out of the noisy, sideways slide into FOMC events, here's a hopeful support scenario for MBS.  This is not a technical indicator, and doesn't really mean anything, but it might feel good to look at.  To be fair, progressively smaller gaps between the lows is positive, at least inasmuch as it suggests the sideways shift is possible.

Data today is centered on 9:55 Consumer Sentiment, as weird as that sounds.  The Trade Gap is Q1 data... Boring!  And PPI is--well...  PPI.   No one really cares, despite the renaissance of deflation talk.  Industrial Production at 9:15am is a "sometimes" kind of market mover, and although Consumer Sentiment isn't much better in terms of the frequency of movement, it tends to surprise more often, and considering it's been in the news recently, markets could be a tad more reactive.