MBS Week Ahead: Bonds’ Bumpy Start is Not About The Fed

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Posted To: MBS Commentary

Fed policy is one of the biggest, most consistent market movers for bonds. With such a high likelihood of a hike, bond markets surely must be focused on this Wednesday's Fed Announcement, right? Yes and no. Sure, if you read the average mass media coverage of this week's outlook, it's all about the Fed, but here's what the average thesis (like "bonds are weaker because the Fed's going to hike") gets wrong . First of all, if bonds are so worried the Fed's going to hike, then bonds will have already adjusted for it. In fact, they've been doing this for months. At this point, the rate hike itself is roughly 100% baked-in to current trading levels. Bond markets will be more interested in the Fed's updated economic projections and Yellen's press conference…(read more)

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