MBS RECAP: Bonds Shake Off Fed-Induced Volatility, But MBS Can't Keep Up

Bonds were roughly unchanged overnight but soon began to improve at the CME and NYSE opening bells. Weak economic data at 10am didn't hurt the rally, but it didn't help as much as more important data would have. In the afternoon hours, speeches from the Fed's Bullard and Powell put some upward pressure on rates as they reminded markets that it's not all gloom and doom when it comes to considering reasons that the Fed may (or may not) cut rates in July. Ultimately, however, the presence of the risks combined with Powell's reminder that it made more sense to stay well in front of any potential downturn was enough to preserve most of the gains from the morning hours. All of the above is well and good, but the "gains from the morning hours" is a phrase best applied...(read more)

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