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MBS RECAP: Bonds Battle Back After a Ceiling Bounce

October 31, 2018
by admin

Today ended up being somewhat triumphant for bonds. It didn’t begin that way, however. Yields were higher overnight and moved up just a bit more in the first hour and a half of domestic trading. Early economic data was largely ignored.

At 9:30am, bonds started improving. Based on the timing, we can assume ETF trading played a key role as investors put on new trading positions for the new month. Stocks were also losing ground heading into 10am and that seemed to have a complimentary effect on bonds. Notably, bonds continued to fare well even as stocks bounced and moved higher by the end of the day.

This leaves us with some evidence for a ceiling at 10yr yield levels near 3.16-3.17% and a floor at 3.06% based on the big bounce seen at the beginning of the week. Given that we’re currently closer to the ceiling, caution is warranted from a lock/float standpoint.

Tomorrow brings the important NFP data–the big jobs report that includes the nonfarm payroll count, unemployment rate, and wage growth data.

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