MBS Day Ahead: Bonds Continue Battle For Lesser Evil

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Posted To: MBS Commentary

There's bad news and not-quite-as-bad news. Longer-term bonds (the stuff we care about) are either in a modest, steady, long-term uptrend (in rate), or they're in a more aggressive, shorter-term uptrend. Actually, they're currently only truly inside the latter (the worse one), but they're very close to the gentler trend–perhaps even trying to break into it this week. This is what bond bulls have been reduced to by late 2017 weakness. The best we can hope for in the near term is a "less aggressive sell-off. " The lines in the chart below help visualize the trends. The yellow lines mark the gentler trend and the teal lines mark the greater evil. For good measure, the important recent ceiling of 2.60% is marked by the white line. We definitely want to avoid breaking…(read more)

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