Why do US Rates Suddenly Care About The UK?

Why do US Rates Suddenly Care About The UK?


Mon, Sep 26 2022, 4:23 PM

If you’re just getting caught up, UK fiscal policy is probably at the center of the last few days of rate volatility.  UK market fallout added to US rate drama today, but why is this suddenly a thing?  First off, there is almost always some spillover from EU rate momentum to the US.  The proportion of the past few days is actually much smaller than normal.  It’s just that UK 10yr yields are up more than 100bps in 4 days, so minimal spillover ends up being massive in the US.  That isn’t to say it’s the only game in town.  Fed speakers continue reinforcing hawkish messages despite recent volatility.  The takeaway is that “higher” remains the path of least resistance for rates until further notice.

08:28 AM

Much weaker overnight in sympathy with extremely sharp losses in European bond markets, but 10yr holds Friday’s ceiling, currently up 8bps at 3.765.  MBS down just over half a point.

11:39 AM

Sideways and volatile, with bonds losing some ground since 9am, but respecting the day’s weakest levels in general.  10yr up 8bps at 3.767 and MBS down just over half a point.

12:34 PM

Sharp losses after Bank of England offers no emergency action on rates.  10yr up 17bps to 3.85 and MBS are down a full point. 

03:57 PM

Sideways at ultra-week levels with MBS down 1.5pts and 10yr yields up 19bps at 3.878%


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