MBS Day Ahead: Bonds Trying to Turn Recent Floor Into a Ceiling

Posted To: MBS Commentary

Coincidentally, yesterday's Day Ahead talked about "pivot points." Now today, we see a prime example of a pivot point in action. Although I labeled it as 2.215% yesterday, let's simplify the conversation by using 2.22% today. A hallmark of "pivot" behavior is the tendency to act as both a floor and a ceiling . A pivot is a level that has been historically more likely to turn bonds away as opposed to letting them pass. In other words when 10yr yields have approached 2.22% from either direction recently, they've been more likely to bounce than to break through. The last 2 days have been no exception. With this morning's gains, it's tempting to conclude the 2.22% pivot will act as a ceiling in the same sort of way it did back in June, but as the chart suggests...(read more)

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