MBS Day Ahead: Bond Consolidation in Full Effect. The Next Break is Important

Posted To: MBS Commentary

With this morning's ADP data and Treasury Refunding Announcement (lays out the slate of auction sizes for the upcoming fiscal quarter ending on October 30th) failing to motivate any sharp movement in bond markets this morning, we begin the day with a new consolidation trend. This occurred due to yesterday's bounce at recent lows, which fell along a line of "higher lows" from late June. Along with the an even stronger series of "lower highs," from early July, the consolidation trend (converging lines leading lows and highs together) is becoming quite clear. The first implication of a breakout from such a consolidation trend is a move to test the corresponding lows/highs that occurred during the consolidation. In other words, if 10yr yields bottomed out at 2.225 in...(read more)

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