Bond Outlook August 15th

Central banks have proven apt at providing liquidity to push the overnight rates in their various jurisdictions back down to the target rates. However, that is only to confirm that they are making effective use of the one tool at their disposal – control of overnight rates. For the rest, “control” belongs to the market, and the market is unhappy precisely because prices of everything associated with the word “mortgage” are unclear and exactly who holds what distressed securities is unknown.