MBS RECAP: Best Day in 8 Months, Best Month in a Year

News

For the end of any given day, bond markets closed at their best levels since April.  If we look at only month-end closing levels, today was the best close in a year.  The amount of ground covered from start to finish was also the biggest in a year, fully engulfing the previous 3 months of weakness.  We’ll talk more about what that might indicate from a technical perspective next week, but suffice it to say, we’re going out (of January) on a higher note (or low note, if we’re talking about rates).

What’s up with all this? 

Nothing to do with GDP data, or Chicago PMI, for that matter.  Data, in general, continues to take a back seat to the bigger-picture market considerations (and that’s saying something, considering data should be one of the biggest considerations for markets).

Today’s show was stolen by the Bank of Japan, which surprised the world by cutting rates into negative territory.  Stocks and bonds both rallied on the news and the momentum continued into the domestic session.  Some of this may well have been due to month-end buying needs among asset managers, so we’ll need to keep a close eye on Monday morning’s trading.

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