Saturday , 16 January 2021

MBS RECAP: Bond Markets Thread the QE Needle, but What’s Next?

By Matthew Graham

Posted To: MBS Commentary

10yr yields rocketed from 1.94 to 1.81 after this morning’s ECB QE announcement and then leveled off right in between (that’s 1.875 for those of you playing along at home). Funny thing about 1.875 is that it is exactly where yields ended yesterday. In other words, bond markets were perfectly unchanged day-over-day, despite massive intraday volatility. Perhaps even more striking was the fact that German bond markets also returned to yesterday morning’s opening levels (from before the ECB leak). So we have the two biggest interest rate benchmarks expressing very little bias in either direction following this game-changing event. Is that because it was so well priced-in to expectations? That’s certainly part of it, but there’s legitimate reason for indecision at this stage…(read more)

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