US 2-Year Premium over Japan and Germany – BBH

By FXStreet FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that the premiums have risen sharply since mid-October and today are at new highs multi-year highs.

Key Quotes:

“In the middle of October the US premium over Germany was near 80 bp. Today it was near 136 bp. Although the German 2-year yield has fallen below -40 bp, it is the US side that accounts for most of the movement over the past month. The US two-year yield has risen almost 30 bp over the past month. The German yield fell by almost 10 bp.

German yields are negative out through six years. In fact, yields out to four years are lower than the ECB’s deposit rate, which effective excludes them from QE operations. Draghi’s dovish comments fueled anticipation of action next week, and in effect, forcing the ECB to cut the deposit rate further of face greater difficulty securing sufficient German instruments for purchase.

Japan’s yield curve is slightly negative through three-years. Japan’s two-year yield has slipped a couple basis points over the past month to yield minus 3 bp. The US premium over Japan for two-year borrowing was dipped below 54 bp …read more

Source:: FX Street