MBS RECAP: Fleeting Gift or Just The Beginning?

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Posted To: MBS Commentary

Today ended up being all about the early afternoon "flash crash" in bond yields (from 2.94 to 2.884% in fairly short order). While they're not common, these sorts of things do happen from time to time. The most notable past example in October 2014 was quite a bit bigger than today's. It occurred near the stronger edged of a longer-term downtrend in rates and completely obliterated that range–for a few days anyway. Rates quickly erased all of the gains in the next session and proceeded to move higher for 3 straight weeks. Today's version is different enough that we shouldn't simply point to 2014 and assume the worst. But at the very least, 2014 lets us know that flash crashes in rates don't necessarily serve to reveal latent bond buying demand that's been secretly…(read more)

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