September has been a long month for the bond market as rates quickly trudged back up to levels that aligned with our more pessimistic assumptions for 2018.  With strong average hourly earnings to start the month and several other upper tier economic reports coming in at the best levels in many years, it wasn't too hard to reconcile the weakness.  We've been forced to watch and wait for the first ray of sunshine to peak through the clouds.

After the past 3 days of trading, we have our first potential break in the clouds.

The most highly risk-tolerant clients and originators will be justifiably tempted to float here.  That's been the case since Wednesday afternoon's Fed events (or possibly as early as last Friday for the truly bold who believed the year's previous highs would continue to provide ceiling support.

Keep in mind that floating continues to be a short-term, tactical endeavor in this market.  The mere fact that we bounced before hitting the year's previous highs doesn't mean we won't have to contend with those levels ever again.  Worst case scenario, it merely means that September has already seen as much selling as it could have seen due to traders' underlying positions (many of which are compulsory based on the preferences of retail clients), and that once the flag goes up on October, it will be 'game on' for selling bonds again.

But again, that's the worst case scenario.  There's also a scenario where bonds are legitimately seeing a show of support here.  Either way, we need to be cautious about the hand-off to October (Monday) and keep in mind that tactical/short-term float decisions rule the day.  In other words, if we continue gaining ground today, and if lenders do a decent job of passing on those gains to rate sheets, this afternoon merits a hard look with respect to locking.  For everyone else, or for those just following along and looking for hope, keep an eye on 3.05-3.06% as a short-term ceiling.  As long as it holds today and Monday, the game remains on.