MBS RECAP: Weaker ISM Data Keeps Bonds Guessing

Posted To: MBS Commentary

Bond markets saw a decent amount of strength in the afternoon. It ultimately allowed 10yr yields and MBS to return to positive territory by the end of the day, although they’d be best-characterized as merely “unchanged.” Who knows where trading levels would have shaken out were it not for the significantly stronger ISM non-manufacturing data this morning. ISM came in at the best levels since 2005, essentially matching the best-since-2004 performance of the “manufacturing” version of the same report on Monday. Here too, the “prices paid” component was the highest in several years . Why does that matter? Simply because the Fed is desperately seeking inflation in order to justify its rate hike trajectory. In fact, if inflation doesn’t pick up in the coming…(read more)

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