What a week in rate markets. Radical swings up and down until yesterday, then two huge mortgage bond rallies Thursday and today, pushing rates net down on the week. And now mortgage bonds are squarely above 25 and 50 day moving averages that were stubborn overhead resistance until yesterday. Rates drop when bond prices rise like this.
The debt ceiling circus has created lots of noise about rates rising on a downgrade, but that’s unlikely because mortgage and Treasury bonds are still a safe haven from mostly weak economic data, including today’s awful GDP. Politicians are still likely to come to a deal that will avoid default. If that happens, I still think rates rise a bit as bonds drop and stocks rally. Full WeeklyBasis recap and outlook tomorrow.