MBS Day Ahead: Weaker, Stronger, Flat... As Long As We Hold This Line

Posted To: MBS Commentary

Global financial markets caught a glimpse of a world with 10yr yields above 3% in late 2018, and they didn't like it. A combination of stock selling and Fed accommodation (a sequence of events, really) helped rates move swiftly back in the other direction in 2019. This move prompts a new question: are rates justified in going any lower if there's a chance that the global economy isn't circling the drain? Such a question depends on exactly how good such chances are. Back in late March when we had surprisingly weak European economic data follow hard on the heels of the Fed's surprisingly bond-friendly decision--one fueled by fears of a weakening global economy--chances were as high as they've recently been that some sort of drain was being circled . This logically coincided...(read more)

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