Last week saw the US bond market fight off an intermittent barrage of weakness  as global markets geared up for the weekend's big Brexit vote.  By Friday, 10yr yields were only 2bps higher on the week.  This left them just inside the longer-term consolidation pattern we've been following (in the chart below), but at risk of breaking out depending on the reaction to the weekend's events.

We expected 2 of the 3 possible outcomes (Brexit deal approved or delayed) to be bad for bonds while only the longshot outcome (no-deal Brexit with no request for extension) would have been good.  As expected, British lawmakers opted for the middle path by foregoing a vote on the current Brexit deal and instead forcing Prime Minister Johnson to request an extension from the EU.  

The bond market response was logically weaker and it sets the tone for the rest of the week.  Simply put, US yields are fighting for their lives or, rather, the life of the consolidation pattern.  Today and tomorrow will be important in determining yields' ability to remain in the pattern.  That said, a breakout doesn't guarantee additional momentum toward higher rates, but it's a risk to beware (and wary) of.

In addition to the tradeflow reaction to the Brexit news, there will eventually be some economic data to trade this week.  Thursday is the focal point with Durable Goods and Markit PMIs (both manufacturing and services).  It's also a Treasury auction cycle week, which can create some additional pressure leading up to the auctions.