Saturday , 23 January 2021

MBS RECAP: Widespread Negative Reprices as Traders Pull Up Stake

By Matthew Graham

Posted To: MBS Commentary

As expected/feared, the path of least resistance for bond markets has been that of weakness heading into the long weekend with big news waiting on the other side. The big news in question is the potential agreement between Greece and its Eurozone creditors. Generally, this has been traded as a net negative for domestic bond markets (and core European markets for that matter), and the current fear is that a firm agreement would warrant yet more negativity. So in a situation where markets do the opposite of what bond traders prepare for, it’s easier for traders to sell now and run the risk of needing to buy later. If they instead held on to bonds now, it would be comparatively harder to sell later, and more costly . That tradeflow story accounts for a majority of the movement today as there…(read more)

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