MBS Day Ahead: Bonds Looking For ISM Spillover. What’s That?

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Posted To: MBS Commentary

In the day just passed, bonds extended a faster-paced rally that began on Tuesday following the ISM Manufacturing data. It wouldn't be fair to say that traders woke up and said to themselves "you know what? I think I'm going to buy some more bonds today because of yesterday's news!" Instead, the bond market looked content to hold steady until the stock market began tanking. I offer frequent reminders about how stock prices and bond yields are not joined at the hip, but when stocks are losing enough ground, we almost always see bonds step in to absorb some of the panicked cash seeking the sidelines. That's exactly what happened yesterday and exactly why the correlation was strongest when stocks were the lowest. It was a classic flight to safety. In the day ahead, we…(read more)

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