MBS RECAP: Early Month-End Buying Boosts Bonds

Posted To: MBS Commentary

Early month-end trading environment provided constant support Strong Durable Goods headline didn't matter gains were linear into the noon hour, then leveled off, and came back after the 7yr Auction 10yr yield ended 4.2bps lower at 1.83 Bonds didn't do much through the overnight session, but so-called "duration needs" became apparent right as domestic traders sat down for the day. "Duration needs" refers to bond traders' need to own a certain mix of bonds that satisfy the "duration" requirement of an index that their investors expect them to hit. In other words, if my portfolio has some money allocated to bond markets based on a certain index, and if that index is expressed in a duration of 7.5 years, I need to own bonds that average out to a 7.5-year...(read more)

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