MBS Day Ahead: Another Way to Look at The Sell-Off (Inflation is Back)


Posted To: MBS Commentary

Bonds enter the 2nd day of the week without any major reprieve in the selling trend. That trend kicked into a higher gear yesterday, prompting us to discuss big-picture, fundamental drivers. Global central bank tightening and increased bond issuance were two of the key themes that corresponded to the biggest moves in rates, but there's another ingredient lurking in the shadows. Lately, the menacing sounds of inflation have been growing louder (from the shadows, even!), leading bond traders to fear its imminent return. Naturally, with economic data humming right along, $1.4 trillion in tax bill spending, and more infrastructure spending plans to be announced at tonight's State of The Union, inflation is a logical concern. Bond markets have a way to price its effects in real time via…(read more)

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