MBS RECAP: Evidence in Bond Beating Case Circumstantial at Best

Posted To: MBS Commentary

Bond markets took a beating today and analysts are still trying to build a case against a slew of potential assailants. Here’s what we know. European bonds attempted to lead US bonds into weaker territory yesterday, but US bonds managed to avoid losing too much ground. In hindsight, US rates likely would have risen more had it not been for the Senate tax bill or the strong 30yr bond auction. On a tangential note, the strong auctions (both for 30yr bonds and 10yr Treasuries in the previous day) distorted the yield curve (the spread between 2 and 10yr yields). That’s where the real bounce was taking place. Strong auctions drew attention away from the bounce in the yield curve which had just hit new post-Financial-Crisis records just before the European bond sell-off. Friday saw the curtain…(read more)

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