MBS Week Ahead: Who's Going to Blink First?

Posted To: MBS Commentary

Core global bond markets--led by German Bunds and US Treasuries--have been trending lower fairly reliably. For European bonds, that rally has occupied most of the month whereas the US version is only really a week old. The latter is also heavily reliant on the stock market . Here's how all of these trends look on a chart: Breaking the charts out individually is a bit misleading. Sure, we can see that stocks and Treasuries share more correlation, but we don't really get a sense for the magnitude of stock losses that have been required to fuel the bond rally. If we set the y-axis scaling based on September's highs/lows, here's how October looks by comparison: So, the question of "who blinks first" is really a question of "when will stocks blink?" In answering...(read more)

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