MBS Day Ahead: Bonds Still Focused on Defense, But Hoping Offense Figures it Out

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Posted To: MBS Commentary

One of the most important themes I've tried to communicate over the past 2 weeks is that the bond market is in the middle of redefining or repricing its relationship with the available data. There was a chance that 10yr yields would try to avoid a big break up and over 3%, but that chance relied heavily on risks that haven't materialized--at least not yet. If they materialize in the future, we'd likely see the positive effects on bonds at that time, but for now, here are a few of those unrealized risks: The trade war hasn't crippled the global economy, and it may end up looking more like "tough talk." The "renegotiation" of NAFTA is a poster child for this. Global markets can look at NAFTA 2.0 and conclude "that wasn't so bad... I guess I didn't...(read more)

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