Can yields break the series of lower highs, lower lows?
It's all about the Fed now as the market counts down to the main event later in US trading.
As much as there will be implications on all asset classes, the reaction in the bond market is arguably the one to watch after the unrelenting bid since May.
There will be two things to watch in terms of how the market may react to the Fed.
The first being the economic outlook and if there are any changes to that given the latest virus trend/delta variant spread. The second being how deep discussions surrounding tapering will be revealed in the statement and via Powell's press conference.
On the former, even if the Fed acknowledges added risks to the outlook, I reckon they will stick with projections that the economy is still going to perform robustly in 2H 2021.
That will keep the taper momentum on track but then it boils down to how quickly the Fed will want to start moving on that front. And as things stand, I'd argue they are in no rush to really jolt the market so expect more talk on "patience".
Yields may gather a tailwind on taper considerations but I reckon bond sellers will still have a tough time stemming the tide as the squeeze is likely to continue.
There are still more questions than answers on the unrelenting bid in Treasuries and I don't see that clearing any time soon until either the virus situation improves dramatically globally and/or the Fed communicates more clearly on normalising policy.
One might even say that the two goes hand-in-hand so that should set the tone for how the market reaction may pan out in the days/weeks ahead.