MBS Week Ahead: Light Week For Data, But Plenty of Threats

Pressure is mounting for the bond market. After a period of intensely calm, narrow trading throughout September, 10yr yields quickly moved to challenge recent range boundaries heading into October. There are known risks on the horizon, with the presidential election and fiscal stimulus being the two biggest flashpoints. Should we assume additional momentum toward weaker levels is simply waiting for a few of these shoes to drop? That depends. Of the two flashpoints, only stimulus carries an obviously negative connotation for the bond market. There are two reasons for this. On one hand, stimulus hurts bonds to whatever extent it helps the economy (a stronger economy supports higher rates and encourages investments to shift toward riskier assets like stocks). On the other hand, stimulus is directly...(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.