MBS Day Ahead: Car Dealership Analogy for Bond Market Supply

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Posted To: MBS Commentary

Corporate issuance expected to continue Treasury Auction cycle in full swing with 10's today and 30's tomorrow Overseas auctions add to global supply Bottom line: lots of debt inventory for sale right now = implicit price pressure Negative connotations aside, imagine a car dealership that periodically receives shipments of its best-selling models. Car buyers know there will be more inventory available when the scheduled shipment comes in, and thus the demand can suffer heading in to the arrival of the fresh supply of vehicles. Now imagine the same dealership also periodically gets shipments of more specialized vehicles that may or may not appeal to the buyers of the 'best-selling' models mentioned about. What do you suppose would happen if there was a massive glut of special…(read more)

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