MBS RECAP: Brexit Bond Benefits Are Apparently Eternal

Last we checked, it was going to be October before Brexit had its next hard deadline.  So it was quite the back burner sort of market mover this week–especially in light of all the recent trade-related drama and other domestic political sideshows.  But then this happened

US Treasuries love to react to “stuff” that happens in London.  Old habits die hard, I suppose.  Then again, London still is a major international financial center and Brexit would certainly affect trade in Europe (and thus, economic growth potential).  A Theresa May ouster makes a hard Brexit more likely, and thus all the other bond friendly stuff just mentioned.

Of course the ouster hasn’t happened yet, nor has the hard Brexit, so markets merely moved into position for new possibilities today.  That meant some moderate gains for Treasuries, which generally followed EU/UK bonds in lock step and then went flat on the day when the former closed.  Unexpected, yet simple and logical.  

It’s still a 3.5 day week before a major holiday weekend, so we still might not get a great idea of how markets will ultimately run with this one until the middle of next week.  In the meantime, considering we were looking at burgeoning selling pressure, we’ll take what we can get!

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/911106.aspx

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