MBS Day Ahead: Another Correction is Underway. How Long Will It Last?

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Posted To: MBS Commentary

Yesterday brought an abrupt confirmation of a bounce in bonds. For 10yr Treasury yields, the scene of the bounce was 1.51% earlier in the week. Multiple attempts to move lower failed, but yields stayed close enough to try for 4 straight days. Things began to change on Wednesday as bonds began to weaken just slightly. Even then, they day's weakest levels weren't any worse than those seen on the previous day. It fell to yesterday, then, to not only break the little sideways range (1.51-1.59), but to crush it. The bounce validates the bigger-picture consolidation trend seen below. There is room to run in terms of momentum/technicals. In other words, bonds were just overbought, so they may shift back to being oversold, and they're not quite there yet–even in terms of fast stochastics…(read more)

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