MBS Day Ahead: Bonds Look to Defend Overnight Gains Amid Busy Data Morning

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Posted To: MBS Commentary

In the day just past, bonds put in an extremely calm trading session with the lowest volume and volatility in weeks. Treasuries ebbed inconsequentially higher and MBS held steady amid a lack of new, threatening US/China trade headlines. In the day ahead, bonds will be defending fairly significant overnight gains that came courtesy of European bond markets. Long story short, Italy said it would break EU rules for its proposed budget in order to spur jobs. Investors are increasingly worried about Italy's solvency. This creates safe-haven buying in German Bunds and other core sovereign debt. It also spills over to help US Treasuries. On both sides of the pond, trading positions had been very short following the trade war rally. After all, it seemed obvious that rates should bounce higher after...(read more)

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