Yesterday’s shift in focus by the ECB toward inflation and away from sovereign debt concerns prompted a sharp rise in German yields yesterday while the recent string of t softer US employment data (payrolls, claims) have helped undercut US rates.
The spread between the 10-year US Treasury note and the like German bund has tumbled to 25 bp today from 56 bp late last week. One more factor to consider for EUR/USD near-term.
In many ways, the narrower spread is a direct reflection on the market’s confidence in the ECB’s inflation-fight credentials and the Fed’s lack of credibility on inflation.
