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BONDS: U.S./Germany 10-Year Yield Spread Consolidates Above 200bp

BONDS

U.S./Germany 10-Year yield spread ~2.5bp tighter at 204bp today.

  • The spread closed at fresh multi-month highs on Tuesday (206.7bp)
  • Trump-driven inflation risk vs. related European growth headwinds have driven much of the recent widening.
  • The spread is ~55bp wider since the mid-September closing low.
  • Most sell-side names that we read have flagged the risk of further widening.
  • German fiscal and political conditions add a further layer of complexity over the coming months, with the CDU currently expected to lead the next government after the February election.
  • The ’23 high (212.69bp) and the ’24 high (218.31bp) present the next upside areas of interest.
  • Zooming out, the initial Trump Presidency peak comes in at 279.59bp, although there are various levels of interest between there and the 23/24 peaks flagged above.

Fig. 1: U.S./German 10-Year Yield Spread

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U.S./Germany 10-Year yield spread ~2.5bp tighter at 204bp today.

  • The spread closed at fresh multi-month highs on Tuesday (206.7bp)
  • Trump-driven inflation risk vs. related European growth headwinds have driven much of the recent widening.
  • The spread is ~55bp wider since the mid-September closing low.
  • Most sell-side names that we read have flagged the risk of further widening.
  • German fiscal and political conditions add a further layer of complexity over the coming months, with the CDU currently expected to lead the next government after the February election.
  • The ’23 high (212.69bp) and the ’24 high (218.31bp) present the next upside areas of interest.
  • Zooming out, the initial Trump Presidency peak comes in at 279.59bp, although there are various levels of interest between there and the 23/24 peaks flagged above.

Fig. 1: U.S./German 10-Year Yield Spread

Keep reading...Show less