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MBS Day Ahead: Bond Rally Running Out of Steam or Just Consolidating?

Posted To: MBS Commentary

With modest overnight weakness and a small negative reaction to this morning's headlines (ADP and Treasury issuance), bonds may be encountering some more resistance on their journey toward lower yields and higher prices. Is this a meaningful signal or just incidental consolidation? Here's the quick answer: although there's never any way to predict the future, there is more evidence for today's weakness being a normal consolidation than a scary reversal signal. Now let's break it down . Bonds have been doing quite well recently with both MBS and Treasuries making steady gains throughout the past 7 business days. By yesterday, MBS had closed at all-time highs on 5 of the past 6 days, and 10yr yields pushed deeper into sustained record lows ("sustained" means I'm…(read more)

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