MBS RECAP: Bonds Hold Ground Despite Stronger Data/Stocks


Posted To: MBS Commentary

With elevated stock/bond correlation of late, it's always worth noting when things move in the opposite direction. Today was such a day, with stocks making solid gains while bonds managed to hold their ground near unchanged levels. Corporate bond issuance and stronger economic data also added to ostensible challenges for rates, thus making the ground-holding all the more interesting. But here are the caveats: 1. Not every part of the bond market held its ground. Shorter maturity bonds (like 2yr Treasuries) lost ground. This pushed the yield curve to its narrowest levels since 2007. This is a reflection of the positive economic data having clear implications for the Fed's rate hike path (which would affect 2yr yields) but fewer implications for longer-term growth and inflation (which…(read more)

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