MBS Day Ahead: Bonds Are Believing The Transitory Inflation Narrative

Posted To: MBS Commentary

When we pondered the possibility (or frankly, the likelihood) of core inflation numbers hitting 3.0%+ several months ago, there was no way to know exactly how the bond market would react. We got our first glimpse from the ultra-hot CPI numbers 2 weeks ago when bonds spiked at their fastest pace in more than 2 months only to calm back down by the end of that week. Now today, another core inflation reading over 3% registered an almost imperceptible reaction. Translation: for now, bonds believe these spikes will be transitory. Before covid, you'd have a very hard time convincing anyone that the spike following chart could coexist with what has been the narrowest trading day of the week so far. In fact, it's been hard for bonds to find any major motivation since the successful defense of…(read more)

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MBS Day Ahead: Bonds Are Believing The Transitory Inflation Narrative
MBS Day Ahead: Bonds Are Believing The Transitory Inflation Narrative

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