MBS Week Ahead: Don’t Get Too Attached

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Posted To: MBS Commentary

The week and a half surrounding Christmas and New Years Day tends to play by its own random rules. Sometimes it fits in with the prevailing trend (in this case, toward lower yields). Other times it plays host to a consolidation or correction. More importantly, you shouldn't get too attached to whatever you see happening in bonds during this time, because it's in no way indicative of what the market will want to do in early 2019. Granted, the opposite can appear to be true, but it would only be coincidence. Bottom line, the default setting for this week's trading action is "random." One of the underlying reasons for all this is the lack of liquidity . While this often goes hand in hand with lower volume, liquidity refers to the amount of buyers and sellers interested in…(read more)

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