Everyone is tired of the persistent sell-off in the bond market, but weariness is no match for the negative momentum. We’ve long since run out of ways to make new observations about the same old phenomenon. At times like this, we’re resigned to waiting for salvation from data or, more miraculously, by some theoretical level at which traders feel it’s time to “buy the dip” in bond prices.
There was a potential case to be made for dip-buying when 10yr yields first crested 4.0%. Indeed, some anecdotal reports from the middle of last week suggested dip-buying was playing a part in mid-day recoveries. The other factor in play was ”
In other, more MBS-focused news, we’ve received a lot of questions about why we continue to focus on 5.0 coupons for intraday reprice risk purposes. This is a fair question considering that 6.125% is the highest rate that can be slotted into a 5.0 UMBS coupon and no one is quoting 6.125% today.
But the current MBS landscape is not normal when it comes to “production” coupons (those that line up with rate sheets) being the most liquid coupons (those whose bid prices are least at risk of being far from where actual trades are occurring). 5.5 coupons are getting close in terms of
© 2021 • C.F. Medina • NMLS#: 2005330
