MBS Day Ahead: Slow Holiday Trading Unless These Key Levels Break

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Posted To: MBS Commentary

Happy Thanksgiving week. These can go a few different ways for bond markets with 2 main varieties standing out. Both varieties are the product of illiquidity (fewer buyers and sellers at any given price point). In the first case, those buyers and sellers are roughly balanced and neither side has an stubborn/desperate outlier. The result is a boring, sideways grind for 3 days followed by a forgotten half-day on Friday. In the second case , there is an outlier or two who is stubborn or desperate–a buyer with big buying needs or a seller who isn't willing to give up their bonds without getting top dollar. In an illiquid environment, such outliers can quickly drive prices/yields higher or lower. The most frustrating part of watching such things happen (well, I guess it's only frustrating…(read more)

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