MBS MID-DAY: Negative Reprices as Bond Markets Reverse Course

Posted To: MBS Commentary

It was a rough morning for bond markets as Treasuries have really only moved in one direction since opening in Europe . Losses were quite livable during those overnight hours, but they picked up as the domestic session began. The key culprit was, and continues to be an influx of new corporate bond deals. Much like Treasury auctions (which traders are also wary about this week), these add extra supply to the overall bond market. The increased competition for investor demand typically puts pressure on prices. The problem is compounded by the fact that Treasuries can be sold in order to protect against rising rates during the corporate issuance process. The corporate issuance selling is further compounded by a tradeflow correction that was already underway. This simply means that Thursday afternoon...(read more)

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