Tactical Directionality Dependent on Long-Term Resistance Levels

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Posted To: MBS Commentary

Today we saw an aggressively bid 30 year bond auction give benchmarks a boost but positive progress eventually stalled at a long term technical resistance level. When short term rallies are capped by long term technical levels, we have to stop and prepare ourselves for the possibility that current market rates will be with us into 2011. That means December closings need to be treated with a tactical market approach. The MBS chart is complicated by the roll today so we're gonna K.I.S.S and use a 10yr TSY note to illustrate directionality. The long horizontal line is our long term technical resistance level. Bond-bulls would like to see yields move back under that line. After yesterday's highs, we can see yields racheting back down toward that line, suggesting a breakout either late tomorrow...(read more)

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