MBS Day Ahead: Bonds in Process of Deciding on Range Breakout

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Posted To: MBS Commentary

In the day just passed, bonds weakened abruptly in the overnight session–mostly due to strong European economic data. Traders were also cautious ahead of Fed Chair Powell's congressional testimony. When the prepared remarks for Powell's appearance were released, however, bonds came roaring back, moving from 2.10+ to 2.04% in short order. They battled the 2.06/2.07 pivot point into the close. In the day ahead, bonds will continue deciding what to do about that important technical level. They've done this one other time before in recent memory (highlighted in the chart below). So far this morning, stronger CPI data is leading yields up and over the 2.07%, but the day is young. We still have another round of Powell Testimony and the 30yr bond auction. The bigger picture technicals…(read more)

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