MBS Live Morning: Not as Much of a Rally as You'd Expect, Given The Circumstances

Russia fully invaded Ukraine overnight and bonds surged in response.  Stocks fell.  Oil prices surged.  Then at 5:30am, oil prices and bonds reversed course.  Stocks were generally already bottoming out after failing to go much lower than the initial sell-off late last night. 

This is not the pattern we expect to see when considering oil's inflation implications, but at this stage of the Ukraine invasion, oil is more of a sentiment barometer than something responding to current supply/demand technicals.  In other words, stocks/bonds/oil were all trading on sentiment and have corrected a bit following the initial move.

The net effect is a bond market that has retained less than half of the overnight rally.  That's still good relative to yesterday's levels, but it's not as good as one might expect, given the circumstances. Notably, even at the best overnight levels, yields failed to break below Monday's lows.