MBS Day Ahead: Last Week's Comeback Was Nice, But Threats Remain

Last week ended with a paradoxical reaction to a jobs report that was much stronger than expected. Although bonds did lose ground at first, they ended up coming back to even better levels by the end of the day. Nonetheless, the week's theme was "slow and steady losses" for bonds after 3 straight weeks of improvement. Now this morning, the bond market is starting out in slightly weaker territory again. It does so even as several closely-watched states continue reporting elevated COVID-19 metrics and as the threat of a protracted economic impact remains very much on the table (continued jobless claims remain near 20 million). The market movement may seem out of sync with the economic threat, but the real threat here is that everything is happening in a relatively logical fashion...(read more)

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