MBS RECAP: Best Day of 2018 For Bonds, But at a Cost

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Posted To: MBS Commentary

It took 3 consecutive days of pushing into the weakest levels in more than 3 years for bond markets to figure out how to rally by more than a token amount. 10yr yields were 3.5bps lower by the time the 3pm close hit and Fannie 3.5 MBS were 6/32nds stronger at 101-15 (or .19 stronger at 101.47). When we get rallies of this size in the midst of sell-offs such as the one that's been in force so far in 2018, we can't really read too much into them on day 1. We should expect periodic corrections in the midst of such negative trends and view further rally potential with a skeptical eye. That's not to say it can't or won't happen–simply that it's not the safe way to play the game we find ourselves in. As for specifics , one refreshing feature of today's rally was a fairly…(read more)

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