MBS Day Ahead: Yes, It's Serious For Bond Markets

Posted To: MBS Commentary

Even yesterday, the situation was already getting serious for bond markets given our past encounters with hints of tapering from major central banks. There was, perhaps, some justification for hope as German Bund yields (the 10yr benchmark for the EU) held steady in yesterday's trading, but that hope was quickly extinguished in today's overnight trading. With that, we're now dealing with full-fledged taper tantrum risk in the EU. US bond yields won't experience nearly as much weakness, but they won't be able to help following a certain portion of the weakness when the stakes are this high. In the chart below, the red line is German Bunds and the Yellow line is US 10yr yields. The correlation (as well as the sense of who's leading whom) is pretty obvious. In terms of...(read more)

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