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U.S. Treasury yields follow Bunds lower

  • The 10-year Treasury yield is lower again today - off two basis points at 2.39% - but for an explanation, it's perhaps best to look across the pond where the 10year German Bund slid all the way to 0.94% amid Mario Draghi's promise of more monetary ease and a disappointing Ifo survey.
  • Janney chief fixed-income strategist Guy LeBas notes the very high correlation on the long end between Treasurys and Bunds of late. While correlations will fluctuate, these patterns can last for several months, so as long as German yields stay under pressure, there's a "decent probability" U.S. ones will as well.
  • "The European interest rate markets are telling us that, one, there’s a very high probability of low inflation or deflation that will last for years to come, and two, that the ECB will be essentially impotent in generating enough inflation to break the eurozone out of this current spiral."
  • TLT +0.35%, TBT -0.7%
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Comments (4)
  • MisterJ
    , contributor
    Comments (683) | Send Message
    IR are still way too high IMO. Current economy warrants l/t Treasury yield 1% below where we are now IMO.
    25 Aug, 05:17 PM Reply Like
  • John Grandits
    , contributor
    Comments (368) | Send Message
    With US inflation running around 2% that would imply a negative real rate....not sure investors, funds would continue buying bonds if that was the case.
    25 Aug, 05:58 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (3993) | Send Message
    what's a bund?
    25 Aug, 07:39 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11136) | Send Message
    It's true the economy is not doing well, however, yields can't drop much further because the action of creating inflation by pumping select banks full of money and running massive deficits witch your own country can't absorb makes the willingness to own US debt at lower yields prohibitively bad, not only do you lose to inflation but you also risk losing huge sums if this silly game continues and no one else is there to prevent the inevitable train wreck.
    26 Aug, 02:24 AM Reply Like
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