MBS Day Ahead: Bonds Defensive as Tax Bill 2 Week Countdown Begins

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Posted To: MBS Commentary

As expected, the Senate passed its version of the tax bill on Friday evening (the passage being the expected part, not the timing). Also as expected, bond markets had some extra selling to do based on the confirmation. Counting up the purported "yes" votes was enough to assume the bill was a done deal, but markets don't tend to fully price-in developments in Washington until they've actually happened. In another way, markets will rush to price-in some of the reaction to events that haven't yet been confirmed , and then ease back in the other direction when the truth is more readily understood. After Friday's initial Flynn headlines, traders quickly accounted for the risk that Trump may have done something worthy of impeachment, and that the wrongdoing occurred before…(read more)

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