MBS RECAP: Bonds Simmer Down Ahead of Pivotal Events


Posted To: MBS Commentary

Bond markets began the day in slightly stronger territory and quickly embarked on the same sort of rally that characterized yesterday morning. Today's rally was driven, in part, by traders covering short bets on bonds (i.e. buying bonds in order to close out short positions–as opposed to "buying bonds simply to buy bonds"). Terror attacks in London caused additional flight-to-safety demand for bond markets, but when the details came out, the rally ran out of momentum. Bonds ended the day in positive territory, but unlike yesterday, yields spent most of the day moving gradually higher . In fact, with the exception of the earliest part of the domestic session, MBS and Treasuries closed at their weakest levels of the day. This speaks more to a market that has run the course it wanted…(read more)

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