MBS MID-DAY: European Bond Markets Putting Serious Pressure on Treasuries/MBS

By: Matthew Graham •

There has only been one story today for domestic bond markets, and that's been European bond markets!  They tanked after one of Germany's most widely followed economic reports (ZEW investor/analyst sentiment survey) came in MUCH stronger than expected.  The following chart of German 10yr yields vs US 10yr yields tells most of that story.

Bottom line, today was definitely not just another casual move in Europe. US markets may be hesitant to take part in this for two reasons.  First (as you can see in the chart), Treasury yields have already been holding in higher relative territory.  Second, and more importantly, we have Fed Minutes coming up at 2pm.  Markets aren't eager to make any big, unplanned moves ahead of events with that sort of market-moving potential.

If the Fed Minutes don't "save" bond markets today, this move in Europe is the single biggest threat we've seen to our chances of seeing 30yr rates in the high 3's or 10yr yields in the 2.2's any time soon.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
99-30 : -0-08
FNMA 3.5
103-11 : -0-06
FNMA 4.0
106-05 : -0-04
Treasuries
2 YR
0.5370 : +0.0330
10 YR
2.3510 : +0.0340
30 YR
3.0640 : +0.0240
Pricing as of 11/19/14 12:47PMEST
Morning Reprice Alerts and Updates
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8:58AM  :  Weaker Morning Thanks Mostly to Europe; Housing Starts no Help
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "sentiment also increased in Germany since they ruled out more sanctions on Russia..those sanctions hurt Germany more than any other eu nation"
Matthew Graham  :  "either way, it's been a very big deal for German bond markets today. Biggest single-session move higher since mid-October. Treasuries are outperforming significantly, but if the Bund move holds, it's a major argument for 10yr yields not making it back into the 2.2's"
Matthew Graham  :  "First increase in nearly a year"
Matthew Graham  :  "ZEW = analysts and investors"
Victor Burek  :  "German stocks been on the rise, oil lower"
Jeff Anderson  :  "Just catching up. I can't find the reason why German sentiment improved. Anyone else read/see anything? Just curious."
Matthew Graham  :  "RTRS- US OCT HOUSING PERMITS 1,080,000 UNIT RATE, HIGHEST SINCE JUNE 2008 (CONSENSUS 1,040,000) VS SEPT 1,031,000 UNIT RATE (PREV 1,031,000 UNITS)"
Matthew Graham  :  "RTRS- US OCT HOUSING STARTS 1,009,000 UNIT RATE (CONSENSUS 1,025,000) VS SEPT 1,038,000 UNITS (PREV 1,017,000 UNITS)"
Matthew Graham  :  "RTRS - US OCT HOUSING STARTS -2.8 PCT VS SEPT +7.8 PCT (PREV +6.3 PCT)"
Matt Hodges  :  "wow, heady stuff, MG. A good, but complicated read. I'd suggest everyone set aside 10 minutes to read and then re-read the Day Ahead."
Matthew Graham  :  "
A new 'Day Ahead' has been issued:
Did The Fed Back Itself Into a Corner on Inflation? Let's Find Out"