Back to business as usual in the Bond market

Once again the bond market "miraculously" was resuscitated after breaking down technically in Friday's session. It is evident that the monetary authorities are extremely concerned about its picture on the technical price charts and are fearful of the move lower attracting momentum based selling from the speculative community. That is at complete odds with their plans to bring down rates on the longer end of the yield curve. So out come the usual culprits to bid them back up even as the equity markets continue their rocket ride higher.

In spite of the move higher today, which as you can see on the accompanying price chart has been on mediocre volume indicating the lack of conviction and skepticism among partcipants, traders are going to be looking to sell rallies in this market unless price moves back to well within the previous 7 week long trading pattern. Even at that, they will then look to sell up towards the previous ceiling near the 122 level.

The bond market appears to be living on borrowed time with the only buyer of any size being the Fed through its primary dealers. There is a tremendous amount of supply coming to the market this week and it will be interesting to watch the Fed's balance sheet continue to grow as they are forced to step up to fill any lackluster demand.

That being said, the key to watch this week will be Wednesday's auction of 10 years where the Treasury will be peddling $24 billion. The next day, Thursday, $16 billion in 30 years go up for sale.