MBS Day Ahead: Bonds Set to Battle Potentially Important Level

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Posted To: MBS Commentary

In the day just passed, the bond market finally got a chance to sink its teeth into the much-anticipated Fed announcement/forecasts/press conference. Traders were hoping to get a read on whether the Fed rate cut cycle is being treated like a fine-tuning adjustment or the beginning of a sustained shift. Of course there was no way for the Fed to know that, let alone communicate it. As we expected, Powell basically said "it depends." Bonds were a bit let down by that, and the somewhat more hawkish Fed funds forecasts. Yields retreated from their anticipatory lows of roughly 1.75%, but nonetheless managed to stay in positive territory on the day. In the day ahead, bonds will battle with the same 1.75% level after an overnight rally. 1.75% or thereabouts has come into play several times…(read more)

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