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This is the real reason the US yield curve looks the way it does. All other developed countries are selling negative or near zero government bonds. This has l
by nostromo 7y ago
This is the real reason the US yield curve looks the way it does.
All other developed countries are selling negative or near zero government bonds. This has lead to huge international demand for US 30 year treasuries.
https://tradingeconomics.com/bonds https://tradingeconomics.com/bonds
US treasuries are giving a greater yield than Italy or Spain for reference. Of course there will be huge demand.
Central banks are no longer islands. They are part of the global economy and a part of a market just like any other. The US acting alone to raise interest rates won't work like it did in previous cycles.
- robocat 7y agoAlternatively investors holding USD may believe that EUR will strengthen against USD over 30 years by more than: 0.5% + US_30year_treasury_bond_rate + risk_adjustment A negative interest rate is fine for US investors if you think the exchange rate will shift enough in your favour to cover your costs.
- robocat 7y agoHappened before: https://www.bloomberg.com/opinion/articles/2019-08-22/swiss-history-of-negative-interest-rates-is-ugly https://www.bloomberg.com/opinion/articles/2019-08-22/swiss-...
- ThrustVectoring 7y agoUS and EU bonds are denominated in different currencies, and the cost to hedge the currency risk with a forward contract eliminates the difference in interest rates. In other words, the effect of the US raising interest rates isn't just to put pressure on EU interest rates, but also to put pressure on the expected future exchange rate.