MBS Day Ahead: Today's Fed Announcement is More Complicated Than Normal

In the day just passed, the bond market managed to add a 2nd day to a friendly correction--a small counterattack against the much larger corrective sell-off that dominated last week's trading (and yes... that weakness was, itself, a counterattack against a MUCH larger downtrend in rates throughout 2019). There were no meaningful reactions to economic data and traders were largely preoccupied with making sense of yesterday's repo market drama. The best recap of the issue I've seen is this Reuters story . In the day ahead, all eyes are on the afternoon's Fed announcement . It's multifaceted to say the least. In just the past few days, Fed Funds Futures suggest the rate cut probability has dropped dramatically--from over a 90% chance last week to a 62% chance today. But Fed...(read more)

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