MBS Day Ahead: How Much Would Bonds Need to Rally to Suggest a Broader Bounce?

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Posted To: MBS Commentary

The short answer is "to 10yr yields below 2.66% and ideally below 2.49%." Those are the levels we'd need to see in order to suggest a more substantial move lower in rates. Unfortunately , the more germane questions involve rates on the other end of the spectrum. The first of those questions would be "how high would rates need to go before bond buyers show up in full force to push rates back down?" No one can say for sure, but the most popular bet is that 3.0% in 10yr yields would do what it did back in 2013/2014, or at least it would try! Technical levels are tricky though. Just because they're important doesn't mean they will necessarily do what they've done in the past. Rather than view 3.0% as some unbreakable ceiling, look at it as an important ceiling…(read more)

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