Yesterday morning, we discussed the fact that bond markets needed to make additional gains beyond recent technical floors, or risk sending the signal that they'd bounce higher (in rate).  This was accomplished in relatively grand fashion as bonds shrugged off European cues and decent economic data.  10yr yields broke low enough to consider the 1.90 level as being "tested." 

When it comes to technical levels, "tests" usually refer to the initial break of a technical target and "confirmation" comes when trading levels either hold the recently broken level for a certain period of time.  With yesterday's break not arriving until the afternoon, we're definitely looking at today as being necessary for confirmation.

Now that we've seen yesterday's CPI data come in close enough to consensus that it didn't inspire much movement, today's Durable Goods data is the new frontrunner.  Here too, a close-to-forecast result probably wouldn't cause much of a stir, but anything else could cast a vote for technical ground-holding or retreat.

A few interesting things to watch as we wait for confirmation include the interplay between domestic bonds and a few related markets.  Stocks certainly don't always correlate with Treasuries, and in fact, their average correlation changes when looking at longer and shorter time frames, but it might be worth watching today.  Reason being, bond yields and stock prices just "switched" from inverse to direct relationship this week.  After the Fed announcement, they moved in opposite directions (pretty normal in such cases as Fed accommodation is seen as good for both markets).  Yesterday, in particular, the stock lever was back with a vengeance, so it will be interesting to see how it plays out today.

The other interesting diversion is the ongoing dance between Treasuries and European bond markets.  Perhaps the past few days aren't so much about Treasury outperformance, and more to do with Treasuries simply getting caught up to European bond markets after they rallied so ferociously earlier in the month.