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MBS Day Ahead: Bonds Fight Back, But This is Still 'Bearish Limbo'

Posted To: MBS Commentary

The most defining moment of the big 2019 bond rally was undoubtedly the August 1st tariff announcement and the resulting massive reaction in both yields and volumes. The 2 weeks that followed represented the market's attempt to price in a scenario where global trade tensions would push the US and other countries toward economic contraction. With the benefit of hindsight, we can look back to mid-August and observe that bonds have essentially been correcting that initial rally ever since then. There was an early opportunity to claim the correction was complete in mid September, but we didn't need hindsight to identify that as a head fake. The past 4-5 weeks, however, have been more serious, with the most troubling developments seen on Thursday and Friday of last week. That's when...(read more)