MBS Week Ahead: Another Week, Another Chance to Run Same Old Play

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Posted To: MBS Commentary

This is the off-season for bonds, but they still have to show up for the game every day. The coaching staff (aka the traders turning the cogs of the underlying bond market) have been running the same play every day since June 27th . It's a play that's been working on both offense and defense, thus providing an easy button for the entire team (even if it's also a "boring button"). No one gets hurt, and no one has a ridiculously good time–typical off season. So what's the play in question? Simply put, bond market players have been tasked each day with playing harder and harder defense whenever yields rise toward 2.88. On offense, they only push hard enough to get yields to 2.825, as seen on the following chart with numerous bounces on the lower teal line. I included…(read more)

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