US EU Bond Yield Spreads

Adding 10-year Spreads to the Mix

US EU Bond Yield Spreads - 10Yr Yield Spread Eurusd 1 (Chart 1)

Rather than simply comparing currencies' overnight interest rates, FX traders pay close attention to differentials in 10-year yields for the market's assessment of longer term interest/inflation rate horizons. The relationship is straight forward. Currencies with a widening yield differential tend to appreciate versus their lower yield counterpart. The above chart shows EURUSD bottoming at $1.1715 in December 2005, nearly 2 months after the US-Eurozone 10-year spread peaked out at 0.55%. Fundamentally, the peak occurred when the ECB signaled the beginning of its tightening campaign, which ultimately took place in December. The US yield spread had accelerated around October 2004, once the Federal Reserve became increasingly expected to prolong its tightening campaign into 2005. But the U.S. yield advantage fizzled as the ECB began raising rates while the Fed's rate hikes were considered nearing their end. Identifying turnarounds in 10-year spreads enables a crucial advantage in currency markets.

Euro’s Breakdown in Line with Yield Spread Spike

US EU Bond Yield Spreads - 10Yr Yield Spread Eurusd 2 (Chart 2)

As EURUSD intensified its decline and broke below the major $1.47 support in mid August from its $1.6035 record high of mid July, the U.S. 10-year yield rapidly shrunk the deficit with its Eurozone counterpart from -3.20% to -2.32%. The $1.45 level in the euro is considered mainly psychological, but the $1.4360 point is a key technical foundation, representing the 38% retracement of the 1.1640-1.6035 move. This level corresponds near the -2.00% mark on the US-EU 10 yr yield spread, which is the high for the year.

Comments (Showing latest 10 of 55) View All Comments
said
mulhouse, France
Posts: 2822
7 years ago
Jan 5, 2011 23:44
within the next two weeks 115 on us treasury
said
mulhouse, France
Posts: 2822
7 years ago
Jan 3, 2011 20:21
30 years mortgage treasury will encounter stiff resistance at the 4.76.
worldwide we experience a wave of refinancing of mortgage especially in dsitrict hardly touched such as washington state florida arizona and nevada.
said
mulhouse, France
Posts: 2822
7 years ago
Dec 6, 2010 16:33
125 on us treasury
catnip
Frankfurt, Germany
Posted Anonymously
7 years ago
Dec 5, 2010 19:51
There is a 10y 10y and also 2y 2y spread divergence in favor of Gbunds to US.
said
mulhouse, France
Posts: 2822
7 years ago
Dec 5, 2010 18:27
proconese
said
mulhouse, France
Posts: 2822
7 years ago
Dec 5, 2010 18:08
ashraf
what was the innovation when lysandre or another one took command of the spartiate fleet?
Ashraf Laidi
London, UK
Posts: 0
7 years ago
Nov 29, 2010 18:05
My latest video on BNN discussing Libor spreads. Correction, I was supposed to say the LIBOR SPREAD dropped NOT ROSE.http://bit.ly/h5z74X

Saka, I need interns to help me udate the yields chart.


Ashraf
said
France
Posted Anonymously
7 years ago
Nov 26, 2010 20:44
learn ur geography
Arms
shanghai, China
Posts: 1
7 years ago
Nov 26, 2010 14:09
Usikpa,Drug, Kak dela?Got it. THanks for your great help.Good luck
usikpa
Moscow, Russia
Posts: 77
7 years ago
Nov 14, 2010 16:18
Arms,

One simple way to make that spread visible at least in relative terms is to try bloomberg.com.

E.g., go tohttp://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND in the internet explorer. Once you get a graph, in the lower left corner, where it says "add a comparison", type in GDBR10:IND, then press Add.