MBS Day Ahead: Risky Rate Floor Still Has Ceiling Potential, But It’s a Long Shot

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Posted To: MBS Commentary

Yesterday saw bonds tag their best levels since early January (Jan 3rd was the only day in over a year where yields closed any lower) on a combination of several events. Those events included weaker inflation data in the morning, a strong 10yr Treasury auction, and some back-and-forth headlines surrounding Brexit. We came into today expecting to see a bigger reaction in this morning's Durable Goods data, but that has quickly proven to be a non-starter. Perhaps we can rationalize this by observing Cap-Ex (the core component of the Durable Goods data that strips out defense and aircraft spending) remaining at lower levels than it was 2 months ago, despite bouncing back somewhat in the most recent report. Rather than rationalize an absence of reaction to today's data, we can also simply…(read more)

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