Friday, May 20, 2005
Europe vs. American Bond Yields: Why the disparity ?
Since the beginning of the year, European bond yields have plunged relative to their US counterparts. This breaks a correlation that goes back many years, as previously the yields for the most part tracked each other.
The European bonds are far more attractive than US bonds, primarily due to the current trends.
Now the disparity is as much as 30 basis points, the widest the spread has veen in a long time.
Primarily, the continuity of the Fed policy to ratchet up yields benefits the US dollar, and the market really reslected that today.
As mentioned in the article I linked to, investors will have to be very creative in bond investing.
