MBS Day Ahead: Bond Rally Meets Resistance: Patience or Panic?

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Posted To: MBS Commentary

In the day just past, bonds continued to push feverishly into the lowest yields since 2017. In fact, 10yr yields were only about 1bp away from the l owest levels since election week in 2016! All told, the rebound from late 2018 has traversed well over 100bps, making this one of the 8 biggest moves in the past 20 years and making 2019 the first true "rally year" since 2014. In the day ahead, we're left to ponder whether all that strength is merely a correction to the overdone sell-off in 2018 or confirmation that the US will inevitably join Japan and Europe in a long, slow grind toward (and below, at times) zero percent rates. More immediately, we're left to consider whether overnight weakness is a sign of a reversal in momentum or just a logical technical correction to all...(read more)

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