Bonds were already trading fairly sideways in the overnight session and only experienced modest volatility after this morning’s economic data. Unless something changes in a big way as the day progresses, it looks like this week’s selling spree has finally leveled off ahead of Friday’s Jackson Hole speech from Powell. 3.127% in the 10yr has emerged as a new potential technical to watch. It offered support but yesterday and again first thing during domestic trading this morning.
In the bigger picture, it’s not unfair to say that the pre-Powell positioning has yields “generally testing” the more relevant 3.07% ceiling.
None of the above much matters though. The sideways summertime range has been completely revisited. Markets are surprisingly interested in what Powell has to say tomorrow despite having a hard time imagining what Powell might say to surprise us. Rates are in a defensive stance in anticipation. Most of that defensiveness has been priced in throughout the month and now we’re simply waiting to see if it was worth it.