MBS Week Ahead: Beatings Can Continue Until Market Morale Deteriorates

Posted To: MBS Commentary

No need to overcomplicate the current narrative: the overall financial market is attempting to balance the reopening of the economy with the risk of COVID resurgence, all the while receiving a boost from massive global stimulus efforts. No matter how pessimistic anyone wants to be about the longer-term economic damage associated with coronavirus, the Fed and Treasury are throwing so much money and accommodation at the problem that markets are chanting the age-old mantra "don't fight the Fed." And that can be extrapolated to include the world's other major central banks. Bonds are realistic. They know there is massive economic damage that can't be immediately healed by stimulus efforts. That's why the 10yr yield is trading around 0.7% despite a massive glut of supply…(read more)