MBS Week Ahead: Positions Part 2: Making Better Sense of Early 2018

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Posted To: MBS Commentary

Last Friday's Day Ahead was all about positions. Read it HERE , if you haven't done so or need a refresher. It advocated caution with respect to floating or otherwise being optimistic based on early gains because those early gains were likely a product of short-covering. Rampant short-covering is only a concern when short positions are uncommonly abundant. In turn, that sort of abundance is uncommon. It relies on a sea-change in some critical component of the market such as Fed policy, labor markets, fiscal policy, or inflation . That's where things might get frustrating this year–because how much have any of those factors really changed? Let's break them down: 1. Fed policy. No major change. We expected a more aggressive Fed hike path in late 2017 and nothing in early 2018…(read more)

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