MBS Live Recap: Bonds Pulled 2 Ways by Stocks and Global Gloominess

Remember the middle of 2016 when rates managed to make it all the way back in line with all-time lows despite having almost no justification in terms of economic data and policy outlooks?  Those low rates were mostly about Brexit. 

Something about Brexit is utterly captivating for global financial markets.  When it first happened, there was a bit of an anticlimactic response, largely due to the time window involved in working out the nuts and bolts.  

Now more than 2 years later, we're getting into the more serious phases of the process.  Markets aren't nearly as rattled as they were in 2016, but shifts in potential Brexit outcomes have nonetheless been relevant market movers this week.  In general, they made a case for bond market gains (i.e. lower rates) this morning, and never really reversed that stance throughout the day. 

Stocks, on the other hand, managed to rally in the afternoon.  Bonds have also been keenly interested in the plight of stocks.  Being forced to choose between two guidance givers, as it were, bonds opted to split the difference, rising just slightly in the afternoon to follow stocks, but not so much as to give the impression that Brexit headlines didn't matter.

Whether any of the above remains relevant in the coming days is another matter.  With Thanksgiving coming up next week, US bond market movement is very close to what has historically been a much more random trading pattern for a few days.  The fact that there's no big-ticket data on the calendar tomorrow only compounds that issue.  Playing the range discussed on MBS Live today is a viable strategy (both in the Day Ahead and the Huddle).