Today was much calmer than yesterday in terms of intraday volatility. The overall trading ranges in 10yr yields and MBS were more than twice as narrow. But in each case, those ranges occurred almost completely outside yesterday’s ranges… on the unfriendly side.
In other words, compared to yesterday’s 2.39-2.47 range in 10yr yields, today’s was 2.44-2.50 (through the 3pm close). The takeaway is that yesterday’s break outside the consolidative trend we’ve been following for months is “confirmed” from a technical analysis standpoint. Momentum indicators are in agreement, and lender rate sheets are in the worst shape in months.
The only caveat is that late December can see trading occur in its own vacuum, ultimately with little bearing on momentum in the following year. Obviously, we can’t know if that’s going to be the case this time around. All we can know is that the current trend is not friendly, and that it makes sense to assume that trend remains intact until it’s defeated.
Once again, there was nothing to be gleaned from today’s data and events. None of them had any discernible impact on bond trading. Furthermore, the timing of volume spikes suggests–if not confirms–that all the movement is a byproduct of year-end trading and the squaring of major trading positions in 2017. More simply put, this is just how traders are trading right now, and it’s not a result of anything that’s happened over the past 2 days.