MBS Day Ahead: Light Data Day and Potential Stock Bounce

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Posted To: MBS Commentary

Yesterday's recap focused on the on-again, off-again relationship between stocks and bonds. Specifically, bonds don't always follow stocks or vice versa, but in the current case, excessive bouts of stock market weakness were unavoidably creating some buying demand in bonds. In other words, even though I love to point out when the correlation is broken, it's not broken right now–even if it's not perfect. Here's an excerpt that doesn't need to be rewritten to be germane for today: But while the correlation was sound, the magnitude left something to be desired as far as bond bulls are concerned. A fairly big move lower in stocks only coaxed a modest amount of buying out of bond traders. This begs the question: what will bonds do if stocks hold steady or improve from here…(read more)

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