MBS Week Ahead: Who’s Going to Blink First?

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Posted To: MBS Commentary

Core global bond markets–led by German Bunds and US Treasuries–have been trending lower fairly reliably. For European bonds, that rally has occupied most of the month whereas the US version is only really a week old. The latter is also heavily reliant on the stock market . Here's how all of these trends look on a chart: Breaking the charts out individually is a bit misleading. Sure, we can see that stocks and Treasuries share more correlation, but we don't really get a sense for the magnitude of stock losses that have been required to fuel the bond rally. If we set the y-axis scaling based on September's highs/lows, here's how October looks by comparison: So, the question of "who blinks first" is really a question of "when will stocks blink?" In answering…(read more)

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