MBS Day Ahead: Risks and Opportunities With Past Precedent

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Posted To: MBS Commentary

We've talked a bit (in this commentary and in the live chat on MBS Live ) about the similarities between the October sell-off and one seen in April/May 2018. Both took yields to what were, at the time, the highest yields in years. Both examples have an initial spike followed by several weeks of narrower trading with a trend-line of "higher lows" being the most noticeable feature during those weeks. As you can see in the following chart, that's the phase that we're currently in (those "weeks of narrower trading with a trend-line of higher lows"). If October ends up like April/May, the there's another spike left to come. The lines along the bottom of the chart are fast and slow stochastics–momentum indicators. The move in May 2018–where both are heading lower…(read more)

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