MBS RECAP: Rates Keep Falling Because You Thought They’d Bounce


Posted To: MBS Commentary

To be fair, after rates fall as much as they fell yesterday (let's specify: the rates implied by bond markets, not necessarily actual mortgage rates), almost everyone is worried about a bounce. Traders were already shifting their bets toward higher rates even before Wednesday's Fed announcement. The imbalance of short positions paved the way for a mild short squeeze on Thursday morning and a massive one in the afternoon following Trump's tariff tweets. After yesterday's massive move, traders again figured "surely, that must be it." And that's a good thing! As long as a big enough contingent of traders continues to bet on rates bouncing, they will provide someone to trade with for the deeper pockets who continue to push rates lower. Paradoxical to some extent, yes…(read more)

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