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MBS Day Ahead: New Narrative? Another Case of Europe's Influence Over US Rates

Posted To: MBS Commentary

From 2011 through the middle of 2016, the European economy, monetary system, and policy landscape had an extreme amount of influence over volatility and outright levels in the U.S. rates market. 2011-2012 = peak EU financial crisis, Greek debt drama, peripheral credit spread concerns (remember the PIIGS?), Grexit debate 2014 = The year that ECB outright asset purchases came into focus 2015 = Final approval on bond buying early in the year and a big blowout rally in EU bonds by April 2016 = Brexit helped US 10yr yields just barely break new all-time lows. All of these bullet points are highlighted on the following chart, including some non-EU-specific events such as the taper tantrum and 2018/2019's "global growth concerns." The charted lines are simply the US 10yr yield and Germany's…(read more)

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