MBS Week Ahead: Bonds On The Run As Brexit Hopes Remain

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Posted To: MBS Commentary

Last week saw the US bond market fight off an intermittent barrage of weakness as global markets geared up for the weekend's big Brexit vote. By Friday, 10yr yields were only 2bps higher on the week. This left them just inside the longer-term consolidation pattern we've been following (in the chart below), but at risk of breaking out depending on the reaction to the weekend's events. We expected 2 of the 3 possible outcomes (Brexit deal approved or delayed) to be bad for bonds while only the longshot outcome (no-deal Brexit with no request for extension) would have been good. As expected, British lawmakers opted for the middle path by foregoing a vote on the current Brexit deal and instead forcing Prime Minister Johnson to request an extension from the EU. The bond market response…(read more)

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