MBS RECAP: How'd We Get Here and Where Are We Going?

Posted To: MBS Commentary

Pre-announced bond buying programs are really quite something. They have all ended up being well-telegraphed enough to allow investors to do their own bond buying well before the program starts, driving rates lower preemptively. This was the case throughout 2014 and even more so at the beginning of 2015 (when it became abundantly clear that Europe was set for QE. Once Europe finally started buying bonds, there was no more front-running left to be done, and rates paradoxically moved swiftly higher. To paraphrase all that: The European Central Bank (ECB) said it was going to buy bonds. Other investors bought bonds based on that expectation, pushing European rates to all-time lows in the process (which helped US interest rates get back near all-time lows). Once the ECB began buying, rates finally...(read more)

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