MBS Day Ahead: Hopes And Fears as Rates Approach Key Ceiling

Posted To: MBS Commentary

We've talked a lot about 2.55% in 10yr yields as an important floor for most of Q1 2019. It was broken after the Fed's March 20th announcement. For more than a week after that, bonds didn't look back. In the past week, however, the shine has clearly started to come off the rally--so much so that 2.55% is quickly coming back into focus. This time, it acts as a ceiling. The mere presence of a "ceiling" in rates doesn't have much bearing on what rates will do next. Sometimes we get a friendly bounce well before a ceiling is reached. Sometimes we see rates pressed up against a ceiling multiple times before finally giving up and heading back down. Sometimes the ceiling is crushed as if it was never even there. At the moment, bonds are approaching this ceiling as if they...(read more)

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