Posted To: MBS Commentary

One interesting theme that's emerging in December is that of weaker economic data actually hurting the bond market. This is certainly not in the conventional wisdom playbook, but it's actually easy to explain in this case. The theory is that when politicians are confronted with timely, big-ticket reports showing troublingly weak employment data, they are incrementally more likely to compromise on a fiscal stimulus package. Unlike monetary support, fiscal stimulus is bad for bonds. If it happens before next Wednesday, it also decreases the odds that the Fed will make rate-friendly tweaks to its bond buying portfolio. The net effect is bond market weakness in response to weak economic data. Case in point, 10yr yields rose this morning following weaker Jobless Claims data. Thankfully,…(read more)

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Source: Mortgage News Daily