Today’s impressive 10yr Treasury Note Auction was the key component in a rally that has taken 10yr yields from one side of their recent range to the other in a matter of hours. The essentially unchanged FOMC Statement was like the 3rd base coach waving in runners (MBS and longer-dated Treasuries) who already had an easy standing triple after the auction. The following video clip from MBS live clearly shows the biggest moves of the day just after the 1pm auction followed by a slight extension of the rally after the 2:15pm FOMC Statement:
It’s an interesting moment in time to assess the trading range in 10yr yields because both the horizontal range (not pictured below) and the bullish trend channel (red lines below) share roughly similar levels. It’s a bit of a stretch to consider 2.05+ as the upper limit of the horizontal range, but the 1.95 seems to have lined up perfectly.
The reason we call attention to that “interesting” phenomenon is for the sake of perspective. In and of itself, today’s movement is quite nice for bond markets, and by extension, MBS. But any way you slice the bigger picture, we’re once again looking at a movement WITHIN A RANGE, even if that’s starting to look more like the more bullish of the two ranges being considered. Moreover, Treasuries should continue to move in the same direction as German Bunds and the Euro given the ongoing concern with European markets. Here’s a look at the Euro and 10yr yield… Not perfectly correlated, but in a general sense, almost always moving in the same direction.
Stocks remain in equivocal territory as well, albeit under a bit more pressure lately. They’ve neither broken back into their previous uptrend or downtrend, instead traversing as much space in between as possible (lately, hovering closer to the bearish trend).