MBS Day Ahead: First Week of The Rest of The Year

Much like the person on a journey of self-improvement might hear a trite pep talk about today being the first day of the rest of their life, bond markets are facing a similar opportunity. They too have been a journey of self improvement, having battled back from long-term highs near the beginning of November (and ultimately making it to the lowest yields in more than 2 months by last Friday). Now they must decide if they will remain on November's positive path. Doing so would be a bigger decision compared to the last 3 weeks. November will end up looking like a reasonably strong correction. If bonds rally from here, however, a case will increasingly be made for a bigger picture shift in interest rate momentum. The most recent past precedent suggests caution. Perhaps more accurately, the...(read more)

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