At the end of this morning's commentary, I discussed the possibility that the past few days have been an over-correction to May's month-end strength, exacerbated by ECB-related volatility yesterday.  To be sure, this is a possibility, but I don't know if it's any more of a possibility than swimming safely across the Puget Sound in a swim suit made of seal meat.  The crowd that's calling for a bounce here, has been doing so since early May. 

The way I see it--and indeed, the way I think it's most logically seen--is that PART of the violence of the past 3 days has been due to the tradeflow correction between late May and early June.  The OTHER PART is the legitimate risk of further weakness.  If we were only dealing with the over-correction, we'd want to see bond markets moving farther back into their previous range, instead of keeping a healthy distance.

For example, the previous high close for 10yr yields until yesterday was 2.282.  It was a focal point for intraday support as well (that means yields bounced around that level quite a bit in May as they tried to find their footing).  In short, it's the best-established threshold of May's range.  If we were returning to May's range after over-correcting yesterday, we'd want to see something better than an intraday low of 2.303.  Because that just looks like a bounce that confirms we're breaking out of the range.

Two caveats:

1. The day isn't over yet.  Well, actually it is over if you look at trading activity.  Everything domestically was tied to Europe.  Volume dropped off a cliff after German Bunds closed.  Even so, it's conceivable we could rally enough to get back near 2.28, but not looking likely.

2. NFP tomorrow.  It could easily bring us back into the range, or just as easily make the range a distant memory.

The tough call: roll the dice with your seal meat swimsuit or...  well, I guess it's not really a tough call.  Sure, you might totally make it without getting eaten, but it doesn't make a ton of sense to try.