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MBS RECAP: Super Sideways Bonds Add To The Mystery

February 14, 2020
by admin

Until today, even though bonds were already in a sideways pattern, we would have to have given the nod to the uptrend in rates vs the downtrend (2 competing trends are colliding, forming a consolidation pattern). Today’s gains complicated that assessment and left the pattern more or less perfectly flat. Seeing as how a 3 day weekend is on top, that’s actually not a huge surprise, even if it’s different than what we were expecting yesterday.

One good that came of today’s session was the bond market’s abundant willingness to react to economic data that was likely to be the week’s most important. Specifically, Retail Sales revisions painted a bleaker picture of the consumer sector–especially when viewing the data in “core” format (i.e. excluding autos/gas/food/building materials). This subset of the report was not only weaker than expected, but significantly negatively revised to boot.

Bonds rallied as much as the sideways range would allow, but ultimately stopped precisely where they needed in order to maximize the equivocal message before the weekend.

Coronavirus updates, econ data, and election updates are all in play as market movers.

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