MBS Live Recap: Fleeting Gift or Just The Beginning?

Today ended up being all about the early afternoon "flash crash" in bond yields (from 2.94 to 2.884% in fairly short order).  While they're not common, these sorts of things do happen from time to time.  The most notable past example in October 2014 was quite a bit bigger than today's.  It occurred near the stronger edged of a longer-term downtrend in rates and completely obliterated that range--for a few days anyway.  Rates quickly erased all of the gains in the next session and proceeded to move higher for 3 straight weeks.

Today's version is different enough that we shouldn't simply point to 2014 and assume the worst.  But at the very least, 2014 lets us know that flash crashes in rates don't necessarily serve to reveal latent bond buying demand that's been secretly amassing its strength.  

The bigger considerations for bonds remain in the future.  Next week is important, as it brings CPI data, the Fed, and the ECB (European Central Bank).  It's the sort of week that could either push rates to new long-term highs or serve to reinforce recent long-term ceilings.  In that light, a bit of jumpiness is understandable this week--even if today's level of jumpiness may not have been altogether intentional (MBS Live members can read and watch more about this in today's Huddle and updates).