Central banks have been loading up on Euros for months. You’d expect them to put those euros to work on the short-end of the European yield curve while the unloved dollar would see yields rise as foreigners shied away from buying US assets…
Just the reverse has happened. 2-year German paper yields a lumpy 1.824 bp while 2-year Treasuries offer only a 0.59% yield. Prospects for a tighter ECB and a status-quo Fed are trumping flows by a wide margin.
One more reason for central banks to keep buying dips. They’re getting paid for it…
EUR/USD has taken back about half the ground lost overnight and it trades now at 1.4807.
