Tuesday, March 26, 2019

MBS Day Ahead: Separating Healthy Bounces From Scary Corrections

Posted To: MBS Commentary

Quite a few talking heads and analysts referred to last Wednesday's post-Fed rally as 'overdone.' They pointed to Thursday's moderate weakness as evidence that bonds would have a hard time making further progress at the new long-term lows. When the rally extended sharply on Friday in the overnight session, pundits doubled down on the 'overdone' calls, saying surely a bounce was imminent. A few hours later, weak Markit PMIs in the US launched yields even lower prompting--you guessed it--even more calls for a jarring return to reality in the following week. If you were around yesterday, you know that such a return (to higher yields) never happened . Bonds continued to defy calls for a bounce by surging as low as 2.377 yesterday afternoon. At that point, there were far...(read more)
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