MBS Day Ahead: Why Aren’t Treasuries Selling Off With Europe? What’s Driving Mortgage Rates?

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Posted To: MBS Commentary

There is some interesting stuff going on with global bond markets. Even as COVID ravages Europe, benchmark yields (German 10yr) are soaring relative to the recent lows. In fact, in only a few days they've surged back up to February's plateau. To put that in perspective, if US 10yr yields did the same thing, they'd be over 1.60% instead of half that. There's no special rule that says sovereign bond yields have to follow each other, but we typically see more correlation than this between Europe and the US. So why aren't we? At the most basic level, we can always forgive extra volatility in securities that have reached more extreme levels. In other words, 10yr German yields are merely "up" to -0.41%. Meanwhile, US 10yr yields have never been below +0.32%. This isn't…(read more)

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