Bond markets rallied impressively overnight with the strongest surge occurring into the 330am hour. German Bund and US Treasury futures added to each others’ momentum, but the strongest move was in Treasuries, following a break of yesterday’s best levels.
This was also a technical line in the sand–something just over 2.58%. During the narrow, range-bind in early October, we’d looked to 2.55 and 2.47 as the next two significant technical levels. 2.55 arrived quickly after the 3:30am surge, but offered firm resistance. Big block sales (“block” = large volume single trades) put an exclamation point on the 2.55 resistance in the early morning hours and bonds have been heading the other way ever since.
This is less detectable in MBS, which have outperformed by holding sideways near opening levels and are still more than an eighth of a point better on the day. But 10yr yields are essentially breaking even right now, and right in line with the pivot point in the mid 2.58’s. A strong bounce lower in yield here would be a very strong clue as to the pre-NFP set-up, but no strong bounce wouldn’t have much of an implication.
There is no significant data on the calendar. Several Fed speakers show up later in the session. We’re mostly watching technical levels with the aforementioned 2.58+ being the current hot topic.