MBS Week Ahead: Ultra Cautious Bond Rally Enters 4th Week. Can it Last?

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Posted To: MBS Commentary

The good news is that bond markets improved–albeit microscopically–during each of the past 3 weeks. That's significant because before that 3-week period, there hadn't even been a single week of improvement in 2018. The last time we saw more than 2 consecutive weeks of improvement was in September 2017. Although it may not have taken rates very much lower, late February definitely (finally) delivered the much-anticipated "1st break" of the relentless uptrend in rates. The bad news is that some of last week's resilience could have been driven by temporary factors. One factor that we already covered had to do with short-covering (pun not originally intended, but in hindsight, it works). This means that investors were betting on rates rising earlier in the week, but after…(read more)

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