MBS Day Ahead: EU Weakness Helping US Bonds, But Don't Count Chickens

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Posted To: MBS Commentary

Despite the presence of a big economic report like Retail Sales (which came out much higher than expected) or the unique event risk presented by the Barr report, the defining moment of the trading day will turn out to be the 3:30am release of just-slightly-weaker manufacturing data in Germany. Case in point: As seen in the chart, the 8:30am Retail Sales data pushed back on the 3:30am rally, but not enough to break into higher yields. Since then, European bonds have continued to slump and US bonds have continued following. Why do we care so much about a piddly little manufacturing headline in Germany? Keep in mind that, in terms of the domestic economy, it's hard to make a case for any imminent recession or significant contraction in economic growth. For such conclusions, we must turn to...(read more)

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