MBS Day Ahead: Bonds Approaching Next Important Ceiling as Weakness Continues

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Posted To: MBS Commentary

The first few weeks of the new year were good for bond markets, but that dream is increasingly being shattered by the past 2 weeks. We were already relatively certain that rates could not make some heroic move back to pre-election levels. We knew we were looking at a temporary correction. But we didn't know how deep it would go or how long it would last. For now, it looks like that correction found its resistance at 10yr yield levels around 2.30. The saving grace for now is that a general semblance of a long term ceiling remains intact somewhere around 2.50%. Specifically, 2.52% is the most significant technical level at the moment. Beyond that, the limits of weakness were stretched as high as 2.641 in mid-December. Breaking above that would put us in a new world of pain. As it stands,…(read more)

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