Production MBS End Week on Good Note

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Posted To: MBS Commentary

Just like sometimes we see profit taking after a nice rally, sometimes we see profit taking after a sell off. We're talking about short sellers. These traders are looking for interest rates to rise. When rates do rise and trader's think they might stop rising, that short position is "covered". This effectively books a profit on a bearish tactical trading bias. Short covering has been a sizable component of the benchmark TSY price gains we've seen since Tuesday. This short covering has also helped FNCL 4.5's bounce higher since touching 100-00 on Tuesday. REMEMBER PARNERTIA? Short covering rallies aren't our favorite because they don't necessarily speak to organic strength in bonds. But they do provide a hint of positivity. Short covering implies traders are nervous about their bearish positions...(read more)

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Source: www.mortgagenewsdaily.com

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