MBS Day Ahead: Has Korea Been a Part of Recent Weakness in Bonds?
Posted To: MBS Commentary
The abrupt sell-off that began on 4/18 has been a bit frustrating from an analytical standpoint due to an absence of clearly-delineated motivations. Granted, we can piece together a fairly compelling narrative from things like the tax deadline causing an increase in money manager bond buying, Syria-related tensions causing a "risk-off" bid that then disappeared, a technical break of March's correction trend, and an overextension of a "flattener" (2 and 10yr yields moving closer together) trade that was subsequently unwound, but it becomes more tangible if we add Korea into the mix. While it's not huge, there's some constant price associated with risk of nuclear conflict involving North Korea. Nuclear risks are positive for bond markets , all other thing being…(read more)