MBS Day Ahead: A Brief History of Long-Term Yield Lows (Freak-Out Roadmap)

Posted To: MBS Commentary

Is it time to freak out? No, not yet Bond yields are at long term lows and that's both exciting and scary. It's exciting for obvious reasons (most people like low rates), but scary because long term lows, by their very definition, occur just before a bounce toward higher rates. The trick, of course, is to determine when we're seeing such a bounce (as opposed to mere "volatility on the way toward lower rates"). The other trick involves deciding when a bounce has gone from simply confirming the end of the previous trend to suggesting the beginning of a new trend toward higher rates. In most of the following historical examples, we can see a similar theme with respect to the aforementioned "tricks." Identifying the "bounce" requires either time or a sufficient...(read more)

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