MBS Day Ahead: Panic In The Bond Market; Why So Serious?
Posted To: MBS Commentary
After weeks and weeks (6, to be specific) of extraordinarily calm and narrow trading ranges in ultra-low-yield territory, the bond market has suddenly decided it's time to jump back up toward higher yields. The move is fairly large, abrupt, and serious. But why? The longer a trading range remains as narrow as the one just witnessed, the bigger the risks become that "something else" will happen. There are really only 2 choices when it comes to departing a narrow, sideways range. Yields were either going to move higher or lower. I won't say that one of those eventualities was more likely than the other, but the weakness we're seeing was certainly more likely in the event that incoming data (either about covid numbers or economic recovery) was markedly stronger than expected…(read more)