There were two options for bond markets heading into today’s session. Recent weakness could have been extended, resulting in a “lead-off” taking yields up and out of the multi-month sideways range. We were right on the edge of such a phenomenon yesterday, and they’re not uncommon in the run up to NFP Fridays. If it had happened today, it would have likely required a much stronger than expected ISM Non-Manufacturing report.
But we didn’t get that.
ISM data came in just slightly weaker than expected. This combined with a generally favorable reaction to the morning’s ECB Announcement in core European bond markets (which always have at least some effect on US bond markets) has helped us realize the other potential scenario for today. That’s the one where we uneventfully hold within the multi-month range leading in to tomorrow’s NFP, after being right on the edge yesterday.
That’s the beginning and likely the ending of today’s story. 2.80 to 2.82% in 10yr yields looks to be successfully defended as a ceiling, and nothing else is likely to be too interesting today. On a positive note, successfully fending off a move higher means the only place left to go is in to positive territory. MBS and Treasuries are doing just that, but tepidly. Still, better than the alternative.