MBS Day Ahead: Bonds Break One Ceiling, But The Next One is More Important

Ever since bottoming out in early 2019, 10yr Treasury yields faced a pretty clear line in the sand from a technical standpoint. 2.82% stuck out like a sore thumb overhead due to multiple instances where it acted as a floor in 2018. It may have seemed too far away to worry about 3 weeks ago, but with 2.75% being broken yesterday/today, 2.82% is next in line. Would a break above 2.82% be the end of the world for bonds? Not necessarily. In fact, in the biggest of pictures, as long as yields don't break above 3.26%, the longer-term outlook could remain positive. It would just be getting off to a rockier start compared to a scenario where yields are instead able to hold fairly steady in the 2.75-2.82 range until finding a reason to rally. Either way, the longer-term outlook will depend on bonds...(read more)

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