MBS RECAP: Bonds Correct Into Weaker Territory As War Risk Dies Down

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Posted To: MBS Commentary

Top and bottom line: war is good for bonds/rates. The risk of war had increased after last week's US attack on the Iranian general and flared further overnight after the Iranian attack on air bases in Baghdad. By not inflicting any US casualties, the attacks allowed Iran to have their retaliation (something that had been a point of uncertainty) without starting a war. Trump confirmed as much today. Thus, paradoxically , the seemingly significant missile attacks last night actually paved the way for the most significant de-escalation so far. Markets are trading it accordingly with Treasuries much weaker on the day, stocks much stronger, and MBS lagging the Treasury move. Economic data was glossed over and the afternoon's 10yr Treasury auction didn't have much of an impact despite…(read more)

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