MBS RECAP: Bond Markets Fight Fire With Fire

Posted To: MBS Commentary

Last Tuesday was not my favorite kind of day when it comes to discussing reasons for bond market movement. The tax bill was in the process of being passed in Congress, thus almost ensuring that anyone who investigated the massive sell-off in bond markets would make a connection between the two. The only problem was that the tax bill had nothing to do with the bond market sell-off. Unfortunately, there wasn’t any great way to approach an explanation of the sell-off without bringing the market’s more abstruse goings-on into the mix. Specifically, we were dealing with the rapid evaporation of liquidity ahead of a holiday weekend as well as a widespread closing of certain trading positions that had helped longer-term rates. There was every possibility that last week’s sell-off was simply…(read more)

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