MBS Day Ahead: Do Bonds Care About Oil’s Slide? Also: New Loan Limits

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Posted To: MBS Commentary

Oil prices are always interesting to consider when it comes to bond markets. After all, oil is a major cost input for the economy. Even the "core" inflation readings, which disregard oil prices, are unable to account for oil's impact on the price of everything else. Point being, if fuel is being burned to transport all the goods that still show up in core inflation readings, oil is still having an impact. From there, of course we can consider that bonds are supposed to care about inflation. They generally do, apart from the moments in history where very few market participants were remotely concerned about it, regardless of the numbers (2012 and 2016 come to mind). But now that core inflation has edged back to (or above, depending on when you look) the 2% level, bond markets are…(read more)

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