• Bonds make token gains ahead of Brexit day
• Brexit poll and Treasury auction helped
• But trading levels are still well above "the gap" set on Monday

Bond markets began the overnight session repeating a similar pattern from the first two days of the week.  In this pattern US Treasury yields have opened at their best levels of the day and have held steady during Asian market hours.  From there, the weakness has been creeping in during European trading hours with a token recovery during the morning hours in the US.  Finally, the pattern wraps up with bond markets drifting into weaker territory by the end of the day. 

All of the days movement was on track for a repeat performance but the weaker drift during the second half of the day never happened.  Moreover, 10yr yields seem to have found a supportive ceiling right in line with what had been a fairly significant floor for most of 2016 (roughly 1.71%).  A Brexit poll showing an uptick in "leave" votes helped bonds hold their ground in the afternoon, as did a strong 7yr Treasury auction.

All that having been said, in the bigger picture, nothing really happened.  Trading levels came nowhere close to approaching the "gap" created with Monday morning's weaker opening levels.  As we talked about on Monday, this gap is now the most important line of resistance.  Until and unless yields fall through that gap, we're only biding time and waiting for a big enough market mover.  We'll likely have it by the end of the week in the form of the Brexit results.  The only catch there is that it could help yields get down through the gap OR it could extinguish near-term hopes of getting back there at all.