MBS Day Ahead: Is The Rally Losing Steam?

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Posted To: MBS Commentary

In the day just passed, traders focused on the yield curve–an opaque term that officially refers to the entire curve of bond yields versus bond duration, but that everyone unofficially agrees to be a reference to the 2yr vs 10yr spread unless otherwise specified (e.g. if I want to talk about the 3m vs 10yr curve or the 5yr vs 30yr curve, I have to say "3m/10yr curve" or "5s/30s" respectively. The yield curve (we're back to 2s/10s now) is the thing that everyone is talking about with respect to " inversion " (when 2y yields are higher than 10s). Yesterday was the first day where the curve was inverted by more than 2 bps for more than a few hours. In the day ahead, traders may begin to push back on yesterday's curve trades. The -0.06% level provided firm…(read more)

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