MBS Day Ahead: Past Examples of Trips to All-Time Yield Lows

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Posted To: MBS Commentary

2012 was almost all about the European systemic crisis, although doubts remained about the US economic lift-off as well. All of the above played out against the background of a generally supportive Federal Reserve. In the summertime, QE was in one of its off cycles and traders increasingly began to expect QE3. Europe was terrified that Greece had set a precedent for Spain, and the latter quickly came into focus at the end of May. By July, the Spanish situation had come to a head, and Italian spreads were coming along for the ride. Basically, the EU was worried that Greece began a domino effect that threatened the collapse of the union. Credit spreads reached their apex in late July and global financial markets were heavily hiding in US Treasuries. EU credit spread spikes line up perfectly with…(read more)

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