MBS Day Ahead: Quickly Becoming a Battle to Remain in a Friendly Trend

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Posted To: MBS Commentary

As we discussed last week, the positive technical signals don't get much clearer than they did after Friday's CPI data (weak inflation helped bonds break a floor that had been stubbornly holding for several weeks. At the time, the biggest risk as I saw it was that the positive cues were "too obvious." When there's such a resounding confluence of technical and fundamental input, it makes sense to ask the question: if everyone wants to be a buyer, who are they going to buy from? The weakness seen yesterday (and so far today) is exactly what we risk by following the technicals to the letter. Frustratingly enough, we still haven't seen enough weakness to abandon our hope for a broader shift toward lower rates. That could be a decision for today, however, if bonds end up…(read more)

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