MBS Week Ahead: Bonds Try to Confirm Last Week’s Victory

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Posted To: MBS Commentary

Post-Italian drama, bond yields rose for 2 straight weeks heading into last week's Fed and ECB announcements. They both proved friendly and the positive momentum continued on Friday. The timing of the Italian drama was important because it began helping bonds right as US 10yr yields were hitting 7-year highs. As yields rose back toward those highs early last week, it was fair to wonder if Italy had merely delayed a move to even weaker levels. The response to last week's central bank events suggested–if not proved –that bonds don't need to re-test high ceilings just yet. Moreover, there may even be a chance to rally. To reiterate a word of caution I've offered a few times, the fundamentals–at the very least–would not make a sustained rally easy. It's the sort of thing…(read more)

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