MBS Day Ahead: Bonds Defend Recent Milestone Ahead of NFP

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Posted To: MBS Commentary

Last week saw a potentially significant development for bond markets with the break below key technical levels in 10yr yields and the yield curve. For 10's, the key level had been (and still is) 2.80%. Whereas it had been acting as a persistent floor throughout March, yields finally conquered it last Wednesday and spent the next two days trading below it. The only risk/reservation had to do with the confluence of temporary events that might have resulted in a push back in the other direction this morning. Those events included the month-end trading environment and position-squaring ahead of a long weekend. In this case, the position-squaring took the form of short-covering (traders buying bonds to close out–or "square"–bets on yields moving higher–aka "shorts"). Indeed…(read more)

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