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The simultaneous growth in the German euro and government bonds this month suggests a “capital flight” about the debt of the Eurozone standard as a shelter from trading war riots, investors say.
German bonds and the euro usually move in opposite directions because optimism for the economy – which enhances the currency – damages the demand for debt that is a secure euro -effective. This model held after the country’s historical expense agreement last month, which saw Euro surge and Bunds sell.
But this month the euro has danced about 5 percent against the dollar, even as a transatlantic gap in bond yields expanded, increasing the additional rate provided by the treasures. Two-year borrowing costs in the US are now about 2 percentage points over Germany, from about 1.7 percentage points in early March.
The usual correlation between the euro and relative norms has been “completely disassembled in the last two weeks, as the Bunds and the Euro have both benefited both of the market concerns caused by American politics,” said Mike Riddell, a Bond -International fund manager. This was “symptomatic of capital flight,” he added.
Simultaneous fall in US and dollar treasures, which normally move in opposite directions, nerves shaken in Wall Street. But in Europe, investors have been struck similarly by rising German prices of Bunds and the euro.
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“Currency markets no longer care about the dynamics of interest rates,” said Benoit Anne, a strategist at MFS Investment Management, adding that a large relative increase in US market interest rates would traditionally cause a strong signal (for the dollar). ”
“There seems to be some global shifts of allocation of assets that are taking place, with global investors watching to diversify away from the US and see Europe and the rest of the world as a more attractive place to invest,” he added.
Fixed income specialists say global investors are reassessing the attraction of treasures as an asset of housing among concerns about the creation of American policies.
Investors are searching outside the US for a “secure government, law and we are in government, with a good economy,” said April Larusse, head of Insight Investment investment specialists.
She told about the raised volatility of the treasury in recent years. The Ice Bofa Move Index, a gauge for bond investors expectations for future treasury instability, has remained at levels since the sale of the 2022 bond market. Last week, it has affected the highest in more than a year along the Treasury Road.
But there are major obstacles for German herds that replace treasures as the secure global asset of the election, with the market only part of the US government bill market nearly $ 30TN. The historical lack of the Bunds has seen them trading for long periods with a sub-zero yield.
Treasury status as the asset of the global choice of choice is also linked to the dominant role of the dollar in global finances and trade, even if commentators are saying that this is being tested by a crisis of trust in US policymaking.
Steven Major, the global head of fixed income research at HSBC, said claims of a secular shift away from the treasures lose that “the marginal buyer of the treasury has been increasingly domestic investors” as some foreign investors belong to their properties.
But there are signs, funds managers say, that the big global investors are really seeking to diversify their secure property properties, with the Bunds one of the key beneficiaries as Germany increases the release to finance its spending plans.
Short -term Bund’s yields were further strengthened on Thursday, while the European Central Bank lowered the rates and traders bet for more landing. Euro was slightly changed.
“There are some investors who take a look at Europe in a way they really haven’t before,” said Larusse and Insight.
Additional reporting by Ray Douglas
