MBS Day Ahead: Bonds Gearing Up For a Big Move

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Posted To: MBS Commentary

In the shorter-term, there's nothing too interesting about the past few weeks of trading. Relative to the highs and lows set in the first 3 weeks of the year, the subsequent range has been well-contained. Over the past 2 weeks, it's been getting narrower and narrower. This is what we'd typically expect to see from a consolidation following a sustained move in either direction. Like most any well-established security with deep liquidity and volume (i.e. not penny stocks or commodities), bonds need time to cool off before heating up again. Unfortunately , there are always 2 potential reasons for the cooling off. They either need to catch their breath before continuing in the same direction or they are cooling off because traders are becoming less committed to pushing the move any…(read more)

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