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MBS Day Ahead: Quick Recap of How/Why Rates Have Rallied So Apparently Quickly

Posted To: MBS Commentary

Good times are rolling in the bond market, even if they're rolling much more for Treasuries as opposed to MBS. Nonetheless, MBS will continue to benefit as long as Treasuries are rallying, and the latter is beginning the day at new multi-month lows. Seeing 10yr yields under 2.9% may feel sudden, but it's actually quite logical . We know rates had been moving higher in general due to 3 main problems: increased Treasury issuance, increased growth/inflation risk, and a Federal Reserve that had no qualms about continuing to remove accommodation. We know that rates had been trading in this 2.8-3.0% range all summer. Then in September and October, they were pushed higher by surprisingly strong economic data (some of which, like average hourly earnings, pointed toward inflation) and even tougher...(read more)