Treasury prices relative to G7 at cheapest in 4 years

The U.S. 10-year Treasury  yield of 2.62% is 72 basis points higher than that of the G-7 average, the largest spread since April 2010, according to Bloomberg.

Earlier this morning, the yield on Spanish 10-year paper fell below that of Treasurys, also for the first time since 2010.

Trying to come up with a reason other than sheer madness, analysts point to the divergence of monetary policy between the U.S. and Europe, noting the ECB last week cut rates and hinted at QE, while the U.S. is tapering and eyeing rate hikes as soon as mid-2015.


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Comments (5)
  • MartinGale7
    , contributor
    Comments (207) | Send Message
    Strange but not half as strange as 10 Year Treasuries being 2.02% higher than Japanese 10 Year JGBs at 0.60%.


    It is nearly undeniable that 10 Year JGBs have greater issuer risk than 10 Year Treasuries. If in doubt look at the %Debt/GDP.


    It is nearly undeniable that in 10 years time, when the principal is repaid, USDs will have weakened less than JPYs. If in doubt look at the way Abe is monetising public debt and trying to debase JPY currency as fast as he can.


    We do live in interesting times indeed.
    9 Jun 2014, 11:50 AM Reply Like
  • Genoregrets
    , contributor
    Comments (45) | Send Message
    So whats the point in this article other than the yields are lower than G7s . Get into the $TBT's or $TLT's
    9 Jun 2014, 11:53 AM Reply Like
  • Christopher Mahoney
    , contributor
    Comments (1314) | Send Message
    US bond yields should be higher than Europe's because US inflation is twice the European level: 1.4% versus 0.7%. Also, the Fed's 2% inflation target has much more credibility than the ECB's.
    9 Jun 2014, 12:46 PM Reply Like
  • Marek
    , contributor
    Comments (1516) | Send Message
    Well Genoregrets,


    I think the point of the article might be that if you are going to pay less for a US bond and earn more than for a European bond, one is likely to want to buy the US bond; thus tempering pressures for the US bond rate to rise in the face of noise about tapering, because they compare favorably with European bonds.


    Means a modicum of influence toward US rate stability; if large bond holders such as the Chinese dump their US bonds, there will be a market to take them up, relieves the Fed from having to do so further, it is already swollen from buying bonds and bad assets.


    A nice tempering effect steering a course between inflation and deflation, avoiding both and avoiding having to answer for either. Balancing on the head of a pin may be, but balancing, nevertheless. And that creates a pool of stability and safety that will appear attractive, yet at a low enough interest rate to continue to punish savers and force investors into asset markets such as stocks and other securitized assets such as mortgage REITS and trusts, thus keeping the funny money floating bubbles going into yet newer heights.


    The world is not quite through with the US as reserve currency just yet, and that endorsement comes from the European bond markets with help from its central banks, it seems. So much for shifting to the YUAN or bitcoins just yet.


    Maybe in a few years we will see the next evolved reserve currency nicknamed the "Deutches-Dollar" or "Dollar-Mark" (DM?).
    9 Jun 2014, 09:45 PM Reply Like
  • Genoregrets
    , contributor
    Comments (45) | Send Message
    Thanks Marek that does clear things up better. At least for me. Guess I should get out of my $TBT's.
    10 Jun 2014, 08:17 AM Reply Like
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