Bond biggest recent issues were caused by a fiscal announcement in the UK that would drastically increase debt and decrease revenue (read: inflationary). Despite the deceptive bounce in MBS yesterday, markets remained in a tailspin as of just a few hours ago until the Bank of England announced emergency bond buying (read: inflationary, but at least it pushes back firmly on the supply/demand panic in the British bond market. If it was a more ideal solution, bonds would be back at last Wednesday's levels as opposed to "still significantly weaker."
But perhaps the bigger question is whether the action by the BOE serves a symbolic role to draw a line in the sand, or rather, to hang a ceiling over the recent high yields at home and abroad. Why would it do this? Or why could it do this?
The bond bull could look at the last week of drama as primarily a function of panic and the breakdown of