Yesterday

- Quiet Monday, but positive for bond markets

- MBS rallied almost half a point

- Data, Fed speakers, low volume snowballs all helped

- 10yr yields began testing resistance floors

Today

- Slightly busier day expected

- No significant data, but Fed speakers

- Absence of data puts focus on technical levels

- Could be a dud in light of Wednesday's much bigger calendar

Strategy

Monday offered a surprisingly bullish session for bond markets with MBS just 2 ticks shy of gaining half a point on the day.  10yr yields dropped more than 4bps and made it down to levels not seen since Nov 8th's NFP day.  Most of the positivity was intact before the morning's only economic data--NAHB's Housing Market Index--but the weaker-than-expected reading simply added to the gains.

10yr yields made it all the way to the lower 2.66's, which is through the other side of at least one fairly significant inflection point.  That said, the pivot in question at 2.671 remained intact at the 3pm close, which is more important from a technical perspective.  Even then, it's harder to read much technical significance into any strength that occurs in super low volume and ahead of a more action-packed session tomorrow

With those caveats in mind, we're left to observe more "line in the sand"-type ranges where bond markets are doing "good" unless they're testing the recent technical support levels.  This can be thought of like moving the yard-sticks in football.  It's been especially evident in Fannie 3.5 MBS where we'd hoped to hold on to the previous session's lows yesterday and now hope to hold yesterday's lows today.  Interestingly enough, in both cases, there have been morning lows and an afternoon "ledge" offering an additional, more bullish technical level, or first-down marker as the case may be.

Charts

10yr Treasury Technicals

Since the June FOMC Meeting, 2.671 has been a central point of gravity around which yields have orbited, suggesting further improvement may not be as matter-of-fact as yesterday's gains.