“The gap” refers to the closing yields in 10yr Treasuries of 2.15% on 11/10/2016 followed by opening yields of 2.17% the following business day. Granted, that was over a 3-day weekend, but such gaps are nonetheless rare events. Rates revisited the gap and bounced in mid-April. They’ve been drifting back within striking distance since then and, with help from today’s NFP, made it all the way across to 2.1435 in terms of intraday levels before rising to 2.16% by the 3pm CME close.
Ideally, we’d want to see yields close below 2.15% for 2 consecutive days before considering the gap breakout to be “confirmed.” As such, next week’s momentum becomes critically important if you’re hoping to see the trend toward lower rates continue. It will basically cast a deciding vote as to whether we’re bouncing again, or breaking through the gap.