Yesterday morning, we discussed the technical outlook for bond markets in the context of "open options."  In other words, the technical studies were not as strong as they can sometimes be, but neither were they confirming any sort of negativity.  In short, the risks were balanced. 

That ended up being a good lens through which to view the day as technical levels came into play right from the outset.  10yr yields bounced just under 1.98 before the open--right in line with Friday's supportive ceiling and the pivoted lower at 1.945--right in line with Friday's best levels.  It would have been just as unsurprising to have seen a move in the other direction though.

Again today, the mainstream technical studies are offering the same message.  Bond markets aren't necessarily in the midst of a high-momentum rally, but they're certainly not giving any selling cues yet. 

That could change at any moment, but the bigger risks don't arrive until TOMORROW morning when we'll have long-awaited European court opinion on the ECB's existing OMT bond-buying program (significant because it informs current QE prospects in the coming weeks).  If that's a dud, it's followed by the week's biggest domestic economic report, Retail Sales.

For today, we'll have to subsist on the afternoon's 10yr auction and several Fed speeches.  Before that, a smattering of overnight data in the Eurozone and the UK could already have the proverbial ball rolling.

Keep in mind that Fannie and Freddie 30yr MBS "rolled" last night, meaning that prices will look like they're about 8 ticks lower today.  This isn't due to actual weakness in MBS--simply the fact that the right side of the chart has February coupons while January (now retired) remains on the left.