How will Treasury yields fare in the days ahead?
The market will have a key debate to sort out in the coming weeks, as the countdown to the much anticipated Jackson Hole symposium begins.
For now, Treasury yields are continuing to track lower as the trend has not really changed post-Fed. There is some thought that we could see some tapering hints to follow going into Jackson Hole and at the event itself, so that might be a factor to watch.
We already got a bit of a taste of that from Waller yesterday here.
As such, Fedspeak will be key items to watch on the agenda in the lead up to Jackson Hole.
But before we get to that, there are other factors at play right now.
The first being virus fears as the delta variant starts to create some sense of uneasiness, with China starting to see a resurgence too. That could very well tilt the balance of risk towards being more cautious should headlines keep this way in the weeks ahead.
The second factor pertains more to this week, with the US non-farm payrolls in focus.
The Fed has stressed the importance of labour market data and there is no bigger one than what we will get later on Friday. The thing here is whether the market will be offered any clues in gauging "substantial further progress" by the Fed.
That could be a catalyst for yields to bounce a little perhaps but one must still not ignore the technical picture. The series of lower highs, lower lows is still continuing as the unrelenting bid in bonds isn't stopping just yet.
The July low @ 1.129% is key for 10-year yields and if that breaks, it could spell imminent danger for risk trades regardless of what the fundamentals might say.
