Good Tuesday AM,

Yuck!! Bonds gapped down at the open and we are likely rangebound here until the jobs report on Friday. Bonds are down today and for no great reason other than the huge flow of funds moving into stocks today. Many believe the equity markets have completed their pullback and thus do not see the need to seek the safety of bonds. There was really no news to speak of today other than the ISM services index which came in just above expectations. The ten-year is currently below the Fibonacci 50% retracement level, if we do not get back above that level today, we will run down and test the 62.8% level (another 100bps in price or .25 in rate). While this is not good, this morning’s fall has already brought us within 50 bps of that level. Mortgage bonds have already tested the bottom of the range. Hopefully it will hold. At this point the selling pressure is still strong and it’s tough to say that we have found a bottom yet. Sadly, this may come down to Friday’s non-farm payroll numbers. The market could be pricing in a favorable jobs report and if by chance we do not get one, we may recapture some of these losses.

Here is today’s picture of the 10-yr treasury:

Please remain safe and healthy, make today great.