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MBS Day Ahead: Let's Check In With European Bonds

Posted To: MBS Commentary

Realistically, Europe has been as big of a friend to US bond markets as the Fed. If it weren't for Greek concerns and the mounting systemic crisis, US bond market pain in 2010/11 would have been much worse. That crisis gave US bond market participants a reason to step in and buy again. And the broader European economic malaise that followed prevented the US from doing what it might have otherwise done. But 2014 is when things really got serious. It's not marked on the chart above, but you may recall that mid-2013 was all about the taper tantrum, and it's the reason US yields diverged so sharply from EU yields. The Fed was signalling a pull-back and things looked grim by the end of the year. Then in early 2014, the ECB announced it was working on true QE–something previously thought…(read more)

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