MBS Day Ahead: Lowest Volatility Ever, or Close to It

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Posted To: MBS Commentary

There are a few different ways to measure volatility in the bond market, but one of the simplest is via the average daily trading range. That particular metric is showing volatility in line with the lowest levels on record. The lower volatility goes and the longer it stays there, the more likely we are to see a big move in rates. Many would argue that, because we've spent so much time moving toward higher rates during the past 2 years, that big move stands a good chance of being rate friendly. The catch is that it could still take months before such a thing begins to materialize. The other catch is that there are good reasons for the extended run of bad luck for rates. Moreover, there's a risk of complacency due to the fact rates are being held a bit lower than they otherwise might...(read more)

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