MBS Day Ahead: Balancing Data and Events Against Geopolitics

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Posted To: MBS Commentary

Heading into the end of 2019, the easiest way to look at the bond market was through the lense of "consolidation." In other words, the trading range had been growing progressively narrower since September–so much so that a breakout seemed like it would be one of the first items on 2020's agenda. Why do we care about a consolidation and a breakout? Simply put, while bonds have been able to stay even flatter than this for even longer on a few occasions in the past, it's not normal and arguably not preferable. An absence of healthy movement can create just as many complications as too much movement. So when we shift from a static, confused, uncertain, narrow trading range, what follows is often a higher energy move in one direction or the other. It's hard to say if January…(read more)

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