Will Bonds Come Back?
It’s a quiet economic news day but a busy week, highlighted by more housing data and the Fed’s favored measure of inflation, Personal Consumption Expenditures.
The rest of the week looks like this:
Tuesday: Case-Shiller HPI, FHFA House Price Index, Jerome Powell speaks
Wednesday: Mortgage Applications, New Home Sales, Jerome Powell Speaks, 5-year Note Auction
Thursday: Durable Goods, GDP, Initial Jobless Claims, Pending Home Sales, 7-year Note Auction
Friday: Personal Consumption Expenditures (PCE)
Mortgage Bonds continue to move lower and opened up beneath the 101.597 Fibonacci floor. They have since climbed back above it, but are very much still battling with the level. If there is a convincing break to the downside, the next floor at 101.203. On a positive note, and with Bonds in oversold territory, any reversal higher would likely coincide with a positive stochastic crossover and lead to a run higher.
This morning the 10-year tested the 1.37% ceiling we identified last week, which is holding for now. This could be the turning point and if yields move lower, it will also coincide with a stochastic crossover that would lead to lower yields.
Begin the day carefully floating.