It sure would be tempting to chalk up the first major gains of the day to Empire State Manufacturing at 8:30, but 10yr yields has already fallen from 1.628 to 1.597 in the 45 minutes BEFORE the report. There was no discernible volume pop on that, or any of the mornings data. As we said in The Day Ahead, no one would be expected to care about economic data today anyway.
Sliding stocks, German Bunds, and Euros all led US Treasuries lower before the open, and domestic traders were waiting to “buy the dip” (in this case, “ceiling” in terms of yields) at yesterday’s 1.62+ pivot. In fact, 1.62+ is roughly the mid-point of the triangle that has been forming in early June, and yesterday afternoons high yields provided a clear bounce on the high side, making for a logical inflection–type movement around the mid point, and another bounce to the lower, stronger side of the triangle.
In fact, things have been so strong this morning (some small measure of panic and/or risk aversion setting in before the weekend), that you could even consider 10yr yields are testing a breakout of that triangle. But it’s not uncommon to see this sort of “lead-off” in one direction or another, shortly before a key event and near the apex of converging trends. The breakout here–if there is one–doesn’t mean much from a technical perspective given that it occurs not only on a Friday, but also that it occurs BEFORE the event that we’d associate with the breakout.
Long story short, nothing is happening… Really… Bond markets are stronger, MBS are up 7 ticks in Fannie 3.5’s hovering around 105-00, but it’s purely coincidental. Things could very much go either way today, and with zero regard for economic data. The other side of the triangle is about 1.64-1.65. Resting on the stronger end for now is just a bonus ahead of the events that can either justify or preclude further rallying, beginning with The Greekend.