MBS RECAP: Bonds Rally on Overnight Data and Position-Squaring

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Posted To: MBS Commentary

Treasuries much stronger overnight, following weak Chinese trade data, strong Japanese bond market gains, and decent European bond market gains Bond traders who bet on yields moving higher were increasingly forced to cover those bets (by buying bonds) The positional snowball rally ran its course by 11am and flattened out into the close Although there is at least one frustrating caveat to discuss, bond markets were at least able to put some green on the board today. Actually, the gains were fairly substantial in Treasuries (MBS only gained about a quarter of a point) with 10yr yields ending the day 7.4bps lower at 1.83. The most popular justification for the momentum was the overnight trade data in China. It showed a much bigger contraction than expected, and bond markets did indeed rally in…(read more)

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