It really does not seem like the two would be related, does it? Ok, in a nutshell, the United States is heavily invested in Europe; they buy our goods (thank God), their currency is considered a safe investment for our money (really?) and the collapse of the European economic system would supposedly be catastrophic for the U.S. stock market. The agreement that the Euro countries reached yesterday told the markets that the European countries were going to try to prevent the collapse of the Euro. The stock market rallied.
What does that mean for interest rates? Money had been pouring in to the U.S. Treasury market to hedge against the collapse of the Euro and the stock market. That money fled Treasuries and went to stocks.
And today? Calmer heads are prevailing. Many are realizing that this agreement, though necessary, is not a cure all. Stay tuned. Rates are coming back.
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