MBS Day Ahead: Converging Risks Making Bonds Indecisive

In late July, bonds rode a wave of momentum toward lower yields with many traders targeting the 1.25% zone in 10yr Treasuries. That floor was broken on Monday July 19th.  The rally extended to 1.128% before bouncing moderately.  Another attempt was made in the week before last, but 1.128% held firm again.  Heading into last week’s bond market supply, yields spiked, but bounced firmly at the 1.37/1.38% technical level. 

These juxtaposed bounces make decent sense.  After 4 months of rallying and a break of the 1.25% target, it was no surprise to see…