MBS Live Recap: The T-Word

Tired of hearing about Turkey yet? This is what happens when fairly quiet markets are interrupted by a thunderous roar from an unexpected place.  Newscasters, analysts, and armchair economists you'll talk to over the weekend are all happy to finally have SOMETHING to discuss other than Elon Musk, Apple being a trillion dollar company, or whether or not Keke loves them.

Long story short, there's nothing too meaningful going on in the world of interest rates this week, and the Turkey thing would be worth discussing even during busier times of year. As such, it's going to feel like the only thing anyone is talking about for a while yet.

Unfortunately, it's pretty simple: it takes a LOT of drama out of Turkey to generate a merely moderate response in US bond markets.  Moreover, when it ends, bonds may have a little correcting to do.  So treat it like the T-word that it is: Temporary!  

For today though, it clearly helped drive the biggest day of gains since the Italian drama in late May and it brought rates to their lowest levels since July 20th.  It only took an 18% intraday move in Lira to do it!  If Treasury prices moved 18%, the 10yr yield would be around 0.6%--a gain of more than 200bps.  I'm sorry if that makes today's 5.6bp gain less thrilling, but it's better than we would have seen if the slightly stronger CPI had anything to say about it.