With this morning's ADP data and Treasury Refunding Announcement (lays out the slate of auction sizes for the upcoming fiscal quarter ending on October 30th) failing to motivate any sharp movement in bond markets this morning, we begin the day with a new consolidation trend.  This occurred due to yesterday's bounce at recent lows, which fell along a line of "higher lows" from late June.  Along with the an even stronger series of "lower highs," from early July, the consolidation trend (converging lines leading lows and highs together) is becoming quite clear.

The first implication of a breakout from such a consolidation trend is a move to test the corresponding lows/highs that occurred during the consolidation.  In other words, if 10yr yields bottomed out at 2.225 in mid-July, and if we now break below the lower consolidation line (roughly 2.255 at the moment), the next battle--the next decision for traders--would likely occur at 2.225.  Sorry about all the 2's and 5's there, but those levels are 3bps apart.

Considering the recent rise in European bond markets, the all-time highs in stocks, the ramp up in corporate bond issuance, and the well-established monetary policy risks (i.e. Fed and ECB making menacing comments about buying fewer bonds and hiking rates, though admittedly fewer recently), bonds seem to be doing pretty good by consolidating at these levels.  

That said, the gradual uptrend from June is still intact.  If we don't break it soon, I would start to think about the next few months as an opportunity for traders to push yields higher with the expectation of "buying the dip" (in bond prices) near the time of September's monetary policy announcements.  Seems like a solid strategy anyway... especially for those thinking one move ahead of the masses.