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MBS Week Ahead: Recent Strength in Bonds Suggests Caution

Posted To: MBS Commentary

The bond market is starting the day fairly flat. Each of the past 4 trading days has seen yields end lower than they began. And over the past two weeks, yields have fallen on 8 out of 10 days . Sounds pretty good, right? But the strength is actually a reason to be cautious heading into this week. All of that strength was made possible by an even bigger dose of weakness at the beginning of the month. In other words, it merely returns us to the recent range, and even then, not to the lower levels of the recent range. In fact, one of the only discernible trends we can pick out of the 10yr chart is the line pointing to higher lows for rates. That uptrend is the baseline. The incumbent. The burden of proof is on those making a case for lower rates. Rarely has the outlook been more straightforward…(read more)

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