Posted To: MBS Commentary

Treasuries started out stronger after overnight drama between China and Hong Kong caused a " risk-off " trade (i.e. sell stocks, buy bonds). MBS continue lagging Treasuries. What's up with that? The performance between MBS and Treasuries can always vary to some extent. Divergences are more easily seen in a few specific situations. One of the most common situations is an obvious risk-off rally (or "flight-to-safety," if you prefer). This type of rally benefits the most basic, most liquid, least risky bonds first and foremost. Treasuries fit that bill better than anything. None of this is a very big deal in the bigger picture. MBS are still in a process of finding their range versus Treasuries, and there has been far more drama in the past few months than we could ever…(read more)

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Source: Mortgage News Daily