MBS RECAP: 9/22/2011


(Reuters) – German bond yields slumped to record lows on Thursday one day after the U.S. Federal Reserve flagged significant risks to the world’s largest economy and tried to kick-start growth through a rebalancing of its portfolio.

The gloomy Fed outlook and weak data in China and the euro zone prompted a more than 4 percent sell-off in global stocks as investors sought security in German government bonds, while the euro zone debt crisis raged on.

Greece has yet to receive its next bailout aid tranche — without which it could run out of money in weeks. Greek workers staged a 24-hour strike on Thursday forcing the transport system to a standstill in protest against the government’s intensified austerity drive aimed at securing those funds.

“The Fed had a pretty gloomy prognosis of the U.S. economy … that clearly has unnerved investors and prompted a new flight to quality into Bunds,” said Nick Stamenkovic, strategist at RIA Capital Markets.

“On top of that there’s huge uncertainty still about what’s going to happen to Greece.”

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