There are few situations that warrant more happiness or relief over what turned out to be a merely flat trading session in bond markets. Reason being: it helps legitimize and confirm yesterday’s more determined movement. Looking at this in terms of 10yr yields, we’d been bouncing back from the 2.15 technical level rather timidly until yesterday and had been completely unable to break through the 2.04 technical barrier. Yesterday not only did the trick, but 10yr yields gave 2.04 a nice courtesy tap on the way down, as if to confirm the technical significance. There was strong follow-through with closing yields at 1.972.
Any time we see a technical break like that, it will always be more meaningful if we can get confirmation from the next trading day. In that regard, today could have merely avoided being too much of a losing day and still easily confirmed the 2.04 break. As it happened though, we didn’t have to cope with much weakness at all. Fannie 3.0s spent the whole day in a narrow 6 tick range with linear supportive bounces right in line with yesterday afternoon’s supportive ledge at 101-25 in Fannie 3.0s. 10yr yields treated 2.0 as today’s ceiling and ended at 1.972 for the second straight day.