MBS Day Ahead: If Sideways Momentum Bores You, Consider The Implication

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Posted To: MBS Commentary

It's no great mystery that momentum in bond markets (at least in 10yr Treasury yields and MBS) is sharply sideways at the moment–not only in terms of the trajectory of the range, but also in terms of that range's narrowness. For the time being, we can chalk this up to a Thanksgiving week that is traditionally lightly-traded combined with indecision ahead of the tax bill uncertainty that will play out in the coming weeks. Longer-term bonds are splitting the difference between a stock rally and a European bond rally. The tanking yield curve (falling green line) is also helping fuel demand relative to shorter-term debt. To whatever extent momentum is "too flat" to be interesting at the moment, it paradoxically becomes interesting because of its implication. The chart above doesn't…(read more)

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