MBS Day Ahead: How The Range Expands

If you're just joining us, we've been talking quite a bit in recent weeks about a consolidation range/trend in the bond market. This refers to a series of higher lows and lower highs resulting in a narrowing trading range--one that eventually runs out of room. When we started tracking this trend, the converging lines suggested bonds would need to make a decision before the end of February, but the confluence of big-ticket data and events didn't suggest a big breakout until halfway through March. How would we reconcile that? Like this: Simply put, when a consolidating range is on course to consolidate too quickly, the baseline assumption is that we'll have to widen the trendlines a bit as certain days seemingly push the boundaries. Tuesday and Wednesday of this week were such...(read more)

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