Tuesday , 26 January 2021

MBS Day Ahead: Limited Data Gives Bonds a Chance to Ponder Their Incredible Momentum

By Matthew Graham

Posted To: MBS Commentary

First thing’s first. Let’s make a quick distinction between bond market components. When we talk about “incredible momentum,” it has nothing to do with how MBS are performing compared to Treasuries, because frankly, they suck in that regard. We would expect MBS to suck in the current environment, for that very reason: Treasuries (and anything else that’s a risk-free economically stable sovereign with low inflation) have had incredible momentum. Still, that momentum translates to MBS making gains (even though they’re not as big as Treasury gains). And gains are gains. Personally, I don’t really care what Treasuries are doing if rates are low. Do you? In fact, any underperformance now is just potential outperformance in the future when rates stabilize or bounce higher…(read more)

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