In times past, an armed conflict involving the US would cause treasuries to rally, at least short-dated ones since they would be the beneficiary of a 'flight to quality' rally but $30T in debt may have changed that perception.

After the attack on Iran, not only have treasuries not rallied but the short end of the curve is being hit harder than the long end. The damage done isn't that bad, small bearish gaps have been left across the curve, and yields are still very near the lows printed on Thursday.

Maybe the fact that oil futures are up more than $5 a barrel, they have been up as much as $8, has impacted fears of inflation, but only time will tell just how much the financial markets will be impacted by this news; gold is up more than $160 an ounce, the S&P futures down 65 points.

At 10:00 ISM Manufacturing PMI is expected to show 51.7, but it's hard to know how impactful that will be on day like today. Otherwise, and normally, this week would be all about the jobs data punctuated by the BLS jobs report on Friday but again, only time will tell since things are anything but normal.

Friday saw bullish gaps left across the curve, but the rallies stalled before the 10-year yield and 30-year yield could break the resistance which I had said back on the 18th of February was unlikely to be overcome without a fight.

I even wrote in Friday's update, "the opening gaps could draw yields back up or worse still, contribute to island reversals on soft openings next week" and right now that's exactly what I'm looking at. Last week's ranges were small, but for the month of February the 5-year yield had a 36 bp range and minus the fractions, that's the exact average monthly range based on a 200-month average.

The high yields last week and for the month of February were very close to the openings, while the low yields were less than a basis point from the closes. Other than the resistance having held, the charts couldn't have looked much better after Friday, but not so much now.

With 10-year and 30-year yields having held within bands strong resistance and with yields now coming back up with bearish 1-day island reversals, nothing other than a fully hedged pipeline makes much sense until something begins to make more sense.

Current coupon conventional mortgages are down a little more than the 3-year which they normally track, but not as much as the 5-year, so maybe spreads are a little wider. And possibly due to an increased fear of inflation, Fed Fund futures have been hit such that they now don't price in the next rate cut until September, something else worth keeping an eye on as things unfold.