MBS Week Ahead: Bonds Set to Battle a Familiar Enemy

Posted To: MBS Commentary

There are two white lines in today's chart. Each represents the pace of the two most recent rallies in rates (with the latter being the current rally) by connecting the trend of "lower highs." The yellow lines denote "the gap" from 2.15-2.17, which has been an important inflection point since the US presidential election (i.e. after breaking above in Nov 2016, we have yet to break below, despite 2 attempts). This week is all about that 2nd attempt. The biggest problem with breaking lower this week is that we get an on-cycle Fed Announcement next week (one of the 4 Fed announcements per year that includes economic projections and a press-conference--thought to be the Fed's preference when it comes to making bigger changes or hiking rates). Bonds may not be keen to...(read more)

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