MBS Week Ahead: Countdown to Bond Breakout Begins

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Posted To: MBS Commentary

Over the past two months, we've seen higher lows and lower highs in 10yr yields and mortgage rates. On a chart, this looks like 2 sides of a "triangle," and is sometimes referred to as such. Other names include "pennant," or simply "consolidation." Regardless of the word used as a label, consolidative ranges have an obvious and irrefutable implication: yields must eventually choose to break the upper or lower line. In the strictest sense, that means bonds are "choosing a side," and potentially revealing some intention to move higher or lower. But as with any technical pattern, there are caveats. Consolidations are going to happen and they're not always going to be incredibly significant–at least not in the sense that the first break outside an…(read more)

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