MBS Day Ahead: Auctions, Elections, And The Fed

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Posted To: MBS Commentary

Bonds had a rough week last week, more than fully erasing the rally they enjoyed as stocks sold-off in the previous week. Today's first chart shows that bonds were quick to turn tail and head back toward previous levels, relative to the bounces seen in stocks and European bonds. In other words, the yellow line moved back up the quickest. Does this mean that bonds are simply predetermined to have a bad time these days? Not entirely. Part of the problem with the first chart (and indeed, with any chart that automatically scales the y-axis such that overlaid lines occupy the same vertical space) is that the relationship between the lines can look vastly different if we adjust the time frame. For instance: This second chart suggests that Treasuries were never all that keen to rally in the first…(read more)

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