MBS RECAP: Bond Markets May Have Lost Ground, But They Had a Great Day


In case you missed it, today saw one of the biggest ever market reactions to a personnel announcement.  Get caught up HERE if you like.  There is no question and no debate over the fact that this was the only salient market mover for bond markets today, and that the GDP data was completely ignored.  If you happen to catch someone saying bonds lost ground because GDP came in at a strong 4.6%, please correct them!  We don’t need that sort of inaccuracy floating around out there, potentially polluting more impressionable minds.

Look at bond’s reaction vs stocks when the news came out:

2014-9-26 Lever

If GDP was responsible for changing anyone’s trading ideas, we’d certainly have seen a reaction in stocks.  The absence of a reaction plus the fact that Gross news concerns the world’s largest BOND fund is more than enough to educate anyone who might be misguided.  If that’s not enough, just ask them to look at when volume kicked in.

2014-9-26 volume

Thankfully, because the fund in question holds Treasuries, they bore the brunt of today’s weakness, leaving MBS to outperform all day long.  That’s not even the best news though.  The best news is that all of today’s bond market weakness is the product of speculation that some bond market investors will pull their money temporarily out of the bond market and then invest it again… soon… IN the bond market! 

In other words, this was like a floater in the pool.  Everyone got out.  Some will get back in once things are cleaned up.  Some will go to a different pool, but very few have been so scared for life that they’ll never go swimming again.

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