MBS RECAP: Does Oil Matter to Rates?

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Posted To: MBS Commentary

Today's key development was over-the-weekend news of drone strikes on Saudi oil assets. Iran is getting the blame, but Trump says he's not in a rush to respond and that he wouldn't like to go to war with anybody. Oil prices logically surged while bond yields dropped. This provided an perfect opportunity to reflect on just how incorrect it is to view oil prices and bond yields as having a reliable correlation. Rather than re-invent the wheel in that regard, I'd just point you to THIS POST from April. In the bigger picture , the overnight gains were insignificant. The drop in yields did nothing to alter the trend toward higher yields ( see the chart here ) that began nearly 2 weeks ago. That said, the trend may be level-off anyway, simply due to the approach of the Fed announcement…(read more)

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