In the day just passed, the bond market spent a 3rd straight day collecting treasure.  For our purposes, "treasure" refers to the newfound, unexpected, and fairly massive gains courtesy of a rapid snowball move across multiple asset classes in response to major instances of trade war escalation.  Last Thursday, it was Trump's tweets that marked the start of the trip.  Friday was mostly an afterthought, but still notable in the sense that bonds improved further with no new motivation.  Yesterday brought China's major retaliatory move with a massive weakening of its currency courtesy of its central bank, and another acceleration of the already impressive bond buying spree.

In the day ahead, the bond market will keep a close eye on its newly acquired Treasure.  Such an impressive cache can't help but draw the attention of thieves.  So far, it looks like today will see the treasure stockpile decline for the first time.  That begs the question: "how much will we get to keep?"  In other words, is this the beginning of the end of recent rally or merely a correction that paves the way for more gains?

If there's one thing we've learned or one lesson that's been reinforced by 2019's strong bond market momentum it's that catching falling knives is risky.  There are many instances where one might have worried that the big-picture rally was reversing, but each time, bonds shook off the weakness and returned to even lower yields.  Corrections and consolidations are a way of life for financial markets.  The trick will be telling the difference between a healthy give-back and the start of something more sinister.  

There's no perfect way to separate the two in the heat of the moment, but technical levels and momentum metrics can help us get closer.  With that in mind, I'd be looking at 1.80% in 10yr yields as the first threshold of concern.  We could weaken as much as we want under that level and it wouldn't even be a mild concern.  Things get a little more unsettling with the next 10bps of weakness (1.90% ceiling).  But it's the next 12bps that would do the most to suggest a bigger-picture reversal.

There are no significant economic reports on tap to inform trade today, although we will get a barometer on demand for shorter-term bonds in the form of the 3yr Treasury auction at 1pm.