MBS Day Ahead: Bonds Begin Day Testing Weaker Boundaries

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Posted To: MBS Commentary

It could just be random December trading that ultimately proves to be inconsequential, but every visit to the top of our recent ranges has to be taken seriously . Every time 10yr yields rise to test (or break) the 2.42% barrier, we're at risk of seeing a broader shift in momentum with "snowball selling" potential. Snowball selling occurs when traders set up "stop loss" levels–yields or prices at which they'll automatically sell in order to avoid further losses. While that's a sound trading strategy in general (risk management 101, really), things get a bit tricky when the important technical levels are widely agreed upon. For instance, we've seen 10yr yields hit 2.42, or close to it, time and time again. Some traders might see the magic line in the sand…(read more)

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