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MBS Day Ahead: Have Bonds Found Their Pre-Fed Range?

Posted To: MBS Commentary

Last week was relatively impressive and perhaps somewhat surprising in terms of bonds' ability to rally in the absence of overt fundamental motivation. As we discussed, the covert motivation was/is largely one of trading positions (i.e. shorts covering). Speaking of things "we discussed," there's also that post-NFP conversation about rally momentum setting the bond market up for a selling opportunity. If short positions have covered and trading levels are starting the week confirming a bounce at recent low yields, is this the selling opportunity? That may depend on the Fed. We're less worried about what they change in terms of policy and more interested in verbiage changes, dot plots, and the invariable update on whether or not the tapering discussion has evolved. Is it…(read more)

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