MBS Day Ahead: Is It Over?


Posted To: MBS Commentary

In the week just passed, bonds rallied to new long-term low yields before bouncing on Friday. Hong Kong protests over the weekend kicked things off on a strong note and weak global economic data on Wednesday sparked the next leg of the rally. Thursday saw more of a momentum/capitulation move without much by way of concrete cause and effect. Friday's reversal was credited to news of potential German fiscal stimulus (more bond issuance, not more bond buying, as it would be if it were "monetary" stimulus). In the week ahead, bonds will get a chance to see how much momentum can build behind a technical bounce. In other words, we've had an impressively strong move to yields that are lower than much of the market anticipated. Has the relentless rally forced all hands? Has everyone…(read more)

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