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MBS Day Ahead: Trend is Not Our Friend For Now

Posted To: MBS Commentary

Yesterday was pretty rough for bond markets as 10yr yields rose the better part of 10bps in fairly short order. It was the worst day of selling in 2 months and it took us to the highest yields since mid April. To make matters worse, it followed what could easily have been viewed as a strong signal for bond buying. The following chart shows 10yr Treasury yield candlesticks. Red is bad. Green is good. The wavy lines at the bottom are stochastic oscillators. The green one is a based on shorter-term math. It's more reactive to any given move in bonds. The red one is slower moving. When both of them agree, and especially if yields themselves are breaking through a simple trend line (such as the lower yellow line from the trend channel in the top part of the chart), it's about as good of…(read more)

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