MBS RECAP: Bonds Protesting Their Short-Term Death Sentence

Posted To: MBS Commentary

It’s not incredibly common for bonds to improve in the week leading up to an almost certain Fed hike. That said, we only have 2 recent examples in the modern economic environment. So there’s not really an established trend that dictates how bonds should behave in these circumstances. In fact, “all things being equal,” the trend would be pretty neutral from here, heading into next week’s Fed announcement, and that it WOULD have been pretty neutral today. But all things aren’t equal. This week added quite a bit of “supply” to the bond market. Most of it was expected, but a fair amount was not. The unexpected supply comes in the form of corporate debt issuance that was either not yet on the radar or that simply came in at larger-than-expected values. The added…(read more)

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