MBS Day Ahead: Bonds Have Lots on Their Mind, But Beware The Bounce

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Posted To: MBS Commentary

As we begin the third day of moderate weakness in bond markets, it's safe to say that we're looking at the correction and/or consolidation that we expected to see as of the end of last week. Bonds wouldn't have needed any other reason apart from the preceding rally to bounce. But as that process unfolds, it's been complicated by other competing stimuli. These include but are not limited to Brexit-related drama, trade war news, the stock lever (stock prices and bond yields moving together), the Treasury auction cycle, and year-end trading position housekeeping. Depending on when you look, you might see one of these factors having more of an influence than another. For example, yesterday saw US bonds take more guidance from Europe while today has seen more of a stock lever effect…(read more)

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