MBS Day Ahead: Bonds Still Focused on Defense, But Hoping Offense Figures it Out

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Posted To: MBS Commentary

One of the most important themes I've tried to communicate over the past 2 weeks is that the bond market is in the middle of redefining or repricing its relationship with the available data. There was a chance that 10yr yields would try to avoid a big break up and over 3%, but that chance relied heavily on risks that haven't materialized–at least not yet. If they materialize in the future, we'd likely see the positive effects on bonds at that time, but for now, here are a few of those unrealized risks: The trade war hasn't crippled the global economy, and it may end up looking more like "tough talk." The "renegotiation" of NAFTA is a poster child for this. Global markets can look at NAFTA 2.0 and conclude "that wasn't so bad… I guess I didn't…(read more)

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