As we enter a holiday shortened week due to Thanksgiving, I would expect the week in treasuries to be fairly quiet unless anything comes out of the trade negotiations with China. It seems to me that every day we either get a tweet from the U.S. that we are close to a deal, or we are far away from a deal and the market is not paying attention to the economic numbers at all, but are only moving on the verbiage. It makes the trade difficult to say the least. Even if we get “Phase 1” agreed upon as most think we will, Phase Two would seem to be much more difficult to achieve. I don’t believe China will be willing to agree on anything in the Phase Two deal as they will most likely want to wait until after the 2020 election to proceed. The thinking behind this is that if a Democrat is in the White House, they can try to garner a better deal for them.
Looking at the technical picture of the Dec 10-year note, the market acts like it’s building a base with last week marking a series of higher lows which bodes well for further gains. A key level to watch is the 129.24 level which is the 100-day moving average. If we get a close above that level, look for the market to test the 130-000 fairly quickly. An interesting trade that is playing out this morning is both the stocks and notes are higher. So, it could mean that the treasuries are sniffing out some weakness on the near-term horizon in stocks. Will have to wait and see.