MBS Day Ahead: MBS Tightening Underway; Range-Bound Treasuries

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Posted To: MBS Commentary

In the day just passed, bonds rallied to start the overnight session, largely following Brexit-related trading in Europe. Yields rose moderately heading into the domestic session, but were quickly slammed down to multi-year lows by the incredibly weak ISM Manufacturing numbers. After that, there was another gradual give-back heading into the close with at least some of the weakness attributed to corporate supply pressure. MBS weaker/wider vs Treasuries at first but then tightened significantly in the afternoon (they held steady while Treasuries weakened). In the day ahead, MBS will again attempt to capitalize on the broader sideways range and modest weakness in Treasuries. At this point, most of the MBS weakness in the 2nd half of August has been erased. That still leaves a bigger batch of…(read more)

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