MBS RECAP: Here's Why Bond Markets Rallied Hard Today

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Posted To: MBS Commentary

If you didn't catch the mid-day commentary , it has a good recap of most of the day's activity. If you're not into links, here are the important parts, distilled into TGIF-style brevity: MBS underperformed Treasuries in a big way due to market volatility (which almost always sees Treasuries making the bigger move, regardless of direction) and because of the next bullet point. Treasury yields--unbeknownst to us without the benefit of hindsight--were set up to fall like dominoes today due to a preponderance of short positions (traders betting on rates going higher). Many market sectors saw investors move to cash or close out positions in order to be nimble ahead of the Fed. A short position in Treasuries is closed (or 'covered') by buying bonds. The short-covering rally in...(read more)

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Source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/541634.aspx

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