MBS Day Ahead: Bonds Making Big Decisions or Merely Acquiescing?

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Posted To: MBS Commentary

In July 2012 and July 2016, 10yr yields visit to all time lows was cordoned-off fairly neatly by yields in the 1.50-1.52 neighborhood. We've been talking more about 1.52 this time around, but in the biggest of pictures, it doesn't really matter. In both cases, yields broke below 1.5-ish, and then treated it as a ceiling for a while before ultimately moving higher. In both cases, a battle was being fought in early August–a battle for reentry to the all-time low range. Looked at another way, the battle could also simply be to avoid breaking above the slightly higher pivot points around 1.60. In the current case, we just defended the ceiling at 1.60-ish and are now doing something we never attempted in 2012: trying to move back below not only the lower pivot point, but also the implied…(read more)

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