Simply Put 

  • Volume and volatility were markedly lower from last week’s levels (to say the very least).  Volume will barely crest Friday’s halfway mark, and as far as volatility is concerned, the trading range has been far smaller than half of Friday’s range.   Don’t even bother comparing to last Tuesday, because today would cease to exist in time and space.
  • All that having been said, Tuesday set a range that may be ready to break based on a combination of this week’s economic data and new month of tradeflows–summertime though it may be (trading is generally lighter in the summer, but recent precedent shows bonds are no strangers to big moves when the mercury rises).
  • Bottom line: today was fairly inconsequential in the recent context, but things may get more interesting as the week progresses

Today’s Data, Headlines, and Scheduled Events

  • Chicago PMI 58.9 vs 60.0 (no reaction)
  • Pending Home Sales +1.5 vs +0.7 forecast (no reaction, bonds followed broader markets into “risk-off” territory)
  • Multiple corporate bond deals announced, but Treasuries are digesting them well.

Long-Term Lock Strategy and Market Themes 

  • A resilient bounce in 10yr yields just under early May ceiling of 2.42% and subsequent rally below 2.30% is reinforcing 2017’s “sideway-to-slightly lower” theme.  We should perk up (defensively) if yields rise back above 2.30% and reconsider the broader theme on a strong break above recent highs at 2.40%.

Short-Term Lock/Float Strategy 

  • We’ve erred on the side of caution since last Monday and that will continue to be the case unless the recent range breaks in our favor.  At minimum, that means a move below 2.28 that is maintained, but ideally, it involves a move below 2.22% in 10yr yields.  
  • Inclined floaters aren’t insane, as long as they stick to lock triggers at 2.34% and 2.39% in more aggressive cases

Technicals/Trends in 10yr (why 10yr?