MBS RECAP: One-Two Punch From Trade War Bounce and Treasury Auction


Posted To: MBS Commentary

First thing in the morning, it looked like we had a chance to see another trade-war-driven bond rally. A Reuters story that detailed the US/China communication breakdown hit the market around 4:30am, causing both stocks and bond yields to move quickly lower. But by 7am, investors signaled they'd had enough. There's only so much markets are willing to brace for when the worst case scenario is something that will play out in gradual fashion. In other words, the worst case scenario is a gradual knock to global economic growth due to trade barriers as opposed to something like a change in central bank policy that has an immediate impact and a quantifiable implication for future cash flows. Markets are thus better-served to react to such things gradually . The best case scenario, however…(read more)

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