Investors around the globe are continuing to demand more yield in return for lending money to sovereign governments and it’s no longer just the PIIGS countries. Yields in Germany and France are rising to 7 month highs and yields in the UK, US and Japan are approaching 6 month highs. Whether its optimism on global growth and higher inflation expectations and/or concerns with debts and deficits, higher yields on still very levered developed economies will create quite a challenge if sustained. Also, ahead of a slew of economic data this weekend in China, particularly CPI which is expected to show a gain of 4.7% y/o/y (highest since Aug ’08), the PBOC may raise interest rates imminently. The rise in US rates continues to lift mortgage rates as Bankrate.com said the avg 30 yr rate rose another 7 bps to 4.74%, the highest since June. For the week ended Friday, the MBA said refi’s fell for a 4th week but purchases rose for a 3rd.
Previous PostA Conversation with Scott Patterson, The Quants