BMO Maintain "Range-Trading Bias"

BMO note that "the new, lower range now appears to have more staying power than originally thought on July 20th when 10-Year yields touched 1.126%. Said differently, in the event July closes with 10s near 1.25% and 30s < 2.0% what started as a short-covering rally will have transitioned to the summer's trading range. Such an eventuality would also provide different context for the 'pain trade' and its sustainability. Historically, a pain trade would lead to a position flush-out and be followed by a gradual retracement. The absence of any meaningful giveback not only reinforces our expectations that 1.77% will represent the high yield mark for the year, but also leaves the lower bound of 1.126% vulnerable to a retest."

• "Eventually, the incoming data will be instrumental in the direction of rates, however there is little on the immediate horizon that will prove more influential than Powell's assessment of the risks to the outlook created by the next stage of the pandemic. While we maintain that the US is unlikely to reinstate lockdowns and 2020-style restrictions, by simply slowing progress toward the new normal as consumer/worker apprehension becomes thematic, it follows intuitively that some of the upside risk for H2 growth has been curtailed. Moreover, inflation has also shifted from the category of being an indicator of a strong economy to a potential inhibition of such. All of this combines to reinforce our range-trading bias in the coming months."