MBS Day Ahead: Bonds Attempt to Consolidate Yesterday’s Gains


Posted To: MBS Commentary

After the overnight session led bonds to open in modestly weaker territory, we're left with the sense that further gains aren't necessarily a given. As I cautioned yesterday, the rally was entirely the result of CORRECTIVE forces as opposed to the emergence of a new market moving theme. The takeaway was that readjustment to Fed expectations on the part of bond markets would be a finite endeavor. It will be "over" whenever a certain magic line in the sand is reached in terms of trading levels and the yield curve (longer term bond yields vs shorter term). The overnight weakness isn't enough to confidently conclude we've reached that magical line, so today and tomorrow are critical. We can watch the yield range from Yellen's press conference yesterday as a good defensive…(read more)

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