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MBS Day Ahead: "Sideways" Victories and Fed Minutes

Posted To: MBS Commentary

The longer-term rising rate trend kicked into higher gear in February. After several false starts, bonds are in the midst of their best attempt yet at a ceiling bounce. What will such a bounce look like? How will we measure its progress? To start, the primary concern is simply avoiding a break above 10yr yields of 1.75% (aka a "sideways victory"). This helps build a case for rates leveling-off and embarking on a more horizontal trend. The first benchmark of a successful consolidation attempt would be a break below 1.62 and/or 1.60 depending on your preferred nearby floor (cases to be made for both). If yields can't break those floors, the implication is for a shorter-lived consolidation that gives way to another ceiling break and new ceilings to be explored in the 1.84-1.95 range…(read more)

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