Halister News

(Bloomberg) -- U.S.-German 10Y spread, nearly 30bp wider since mid-Feb. “when the market began to price in a greater chance of a March ease” by ECB, “can widen to about 180bp on a policy announcement,” TD strategists led by Priya Misra say in March 4 note.

• “At that point we would recommend owning Treasuries over bunds as investors should look to move to ‘higher yielding’ Treasuries”
• TD expects a 20bp rate cut, EUR10b-EUR15b increase in monthly bond purchases and an LTRO
• This should push German 10Y yield “to record lows in near term,” and to -5bp by end-1Q
• While USTs “typically lead bunds and in fact all global rates,” there have been “notable exceptions” since late 2014, in particular when ECB QE was launched in early 2015