September has been decidedly negative for bond markets so far, and largely without any regard for economic data and events. Given that ‘month-end’ was only a day after the European Central Bank announcement, it’s tough to say whether we’re witnessing weakness with a purpose, or simple shuffling of tradeflows heading into a new month.
The ‘shuffling’ would be no big deal. It happens from time to time and indeed MUST happen periodically even during prolonged periods of bond market positivity. If this does turn out to be such a period, we’re getting close to the point that the weakness should at least level-off. Technical analysis can be helpful in measuring this and several of the mainstream technical studies are included below, as well as notes on how they’d need to evolve in order to give us the reversal signals we’re looking for.
Today’s calendar is yet another barren wasteland, devoid of significant market movers. There are no meaningful economic reports and although the week’s Treasury Note auctions begin, today’s is only the 3yr–not likely to register much of a response in MBS. So we’re left to watch trading unfold due to less overt considerations (corporate debt hedging, portfolio balancing, other tradeflows) and then to decide whether or not it mattered.