MBS Day Ahead: Careful What You Wish For

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Posted To: MBS Commentary

I owe you an apology. I caused a bit of a sell-off in bond markets today. It all started yesterday afternoon when I called attention to the fact that Italian headlines and credit spreads were still moving markets even though they shouldn't be. Markets didn't like being pigeon-holed apparently and have taken the opportunity overnight to show that they don't NEED Italy to set the tone. Case in point, observe the teal line in today's chart. Note that it had correlated almost perfectly with intraday movements in German and US 10yr action. Now today, there's been a departure . A weakening in Italian credit spreads is no longer helping core bond markets. What gives?! For all intents and purposes, this is the markets warning shot regarding next week's central bank announcements…(read more)

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