Wednesday , 13 January 2021

MBS Day Ahead: Revisiting “Month-End Bond Buying,” Plus a Look at The Current Trend

By Matthew Graham

Posted To: MBS Commentary

We often talk about the month-end trading environment as relatively more supportive for bond markets–all other things being equal. Reason for this are explained in THIS PRIMER , but here’s the gist. Let’s say you’re a money manager who holds a certain amount of bonds in your portfolio. If you do nothing, those bonds will eventually all be paid off (because bonds are repaid over time), and you’ll find yourself with no bonds in your portfolio! To remedy this, you’ll have to figure out a nominal amount of new bonds to buy every month that keeps your bond holdings where you want them. “Where you want them” is often determined by a bond market index (such as Barclay’s aggregate Treasury index). It’s expressed in terms of duration, which changes slightly based…(read more)

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