Last week provided a much-needed recovery that counteracted some of the fast-paced selling seen in the first week of November.  Despite the friendly direction of the move, the pace and fervor left something to be desired--at least for those hoping to see clear confirmation that traders were thrilled to buy bonds when 10yr yields approached 2%.  To be fair though, one could argue that traders were at least somewhat enthusiastic about that, even if they weren't downright thrilled. 

The combination of solid support and the absence of fervor reinforces a range-bound theme heading into the end of the year.  Major updates on the trade deal can provide plenty of volatility inside a range while actual progress could certainly prompt a breakout from the trend.  Gauging the opposite of progress is a bit trickier because we have to assume both sides are employing a bit of negotiation strategy when we get downbeat trade headlines (akin to the car buyer walking out of the dealership hoping to get a call later with a lower price).

For now, the previous consolidation trend has simply shifted from sideways to "ascending" (i.e. the yellow lines are both upwardly sloped as opposed to the upper line being sloped toward lower yields).  The trend also now extends through 2019 instead of through November.  That said, don't expect it to last in perfect fashion.  We'll likely see a breakout before then.

The potentially friendly shift in longer-term momentum coupled with a seemingly solid bounce at the 1.90-1.94 technical zone offers some hope that the breakout will be on the friendly side, but keep in mind, we're only ever one or two trade headlines away from being pushed quickly toward the other side of the field.  (Indeed, the week began with just such a headline, covered in THIS UPDATE on MBS Live).

In terms of economic data, things don't get serious until the end of the week with Philly Fed on Thursday and Markit PMIs on Friday.