MBS RECAP: 2nd Straight Day With Help From North Korea

Posted To: MBS Commentary

It's tempting to say that bond markets are definitively pushing back against the sharp correction that brought rates higher over the past 2 weeks. In fact, that's likely the case, but we have to ask ourselves just how open-and-shut this case may be. Just like last Friday, bonds benefited from headlines surrounding North Korea. This time, a North Korean official said the US has declared war and that North Korea has the right to shoot down US warplanes even if they're outside North Korean airspace. While this could be viewed as yet another example of overblown rhetoric, markets didn't shrug it off--likely because of the wording. "Declared war" and "U.S." are hot buttons for trading algorithms, which clearly had a field day with the initial release. Then traders...(read more)

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