MBS Day Ahead: “Japan Effect” Tested; Torch Passed to Month-End

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Posted To: MBS Commentary

Over the past 2 weeks, there has been quite a lot of speculation on the effects of Japanese monetary policy communications on US Treasuries. I've mentioned these in passing, but haven't really spent too much time on it because I didn't happen to agree that it was the most important market mover in play. Today brings a bit of vindication for that stance as Japan was out overnight with a policy announcement that essentially aimed to quell all the recent speculation. As far as Japanese bond yields are concerned, the BOJ (Bank of Japan) was successful. Yields quickly rallied about as much as they'd previously sold off on July 20th. So how much was this worth to US Treasuries? As it turns out, not very much. This is how the chart looks if we scale it based on a time frame leading…(read more)

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