Big investors are selling US Treasuries and buying European government bonds, betting that cooler inflation in Europe will allow its central bank to start cutting interest rates sooner than the Federal Reserve.
Money managers at Pimco, JPMorgan Asset Management and T Rowe Price have all increased their exposure to European government debt in recent weeks.
That has helped push the so-called spread, or gap, between benchmark 10-year German and US borrowing costs to 2 percentage points, close to the highest level since November.
“The path for rate cuts in Europe is clearer than in the US,” said Bob Michele, chief investment officer and global head of fixed income at JPMorgan Asset Management. “It is hard to find an economic reason for the Fed to cut rates.”
He added that he currently has a larger than usual holding of European government bonds and has been “moving in [the] direction” of acquiring more.
The shift comes as the US…
