MBS RECAP: Momentum Decidedly Shifts on Bonds and Brexit

• Bond selling pressure followed-through from last week
• Updated Brexit polls provided a tangible justification
• Intangible math provided momentum (and may continue to do so)

"Intangible math" in the bullet points above is a reference to technical analysis--a mathematical and largely objective way to analyze and predict the movement of markets based solely on market movement itself.  In other words, technical analysis doesn't understand "Brexit," nor does it have any way to adjust its methodology for those sorts of fundamental events.  

With that in mind, the technicals were already suggesting a bounce may have been in the cards after hitting long-term lows last week.  Today's additional weakness acts as confirmation from a technical standpoint and it's really as simple as that.  

With the weekend's polls showing an evaporation of support for Brexit, the fundamental analysis is in line with the technical analysis.  When the two schools of thought are in agreement, it's one of the few times financial markets make better than 1:1 odds.  The problem is that those odds were made late last week and we can't be sure to what extent the probable weakness has already run its course.  Still, it's safer to assume more weakness for now--especially because it would take an about-face in Brexit polls for bonds to gain enough ground to matter before Friday.