(Bloomberg) — Vanguard and Goldman Sachs Group Inc. are among the firms betting that German government bonds faring better than US Treasury debt is a theme that has further to go.
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A proxy for the trend — the margin by which the US 10-year yield exceeds Germany’s — has increased to about 1.9 percentage point from this year’s low of about 1.5 percentage point in mid-September, when the Federal Reserve cut US interest rates by a bigger-than-anticipated half point. Since then, the US rate has climbed roughly 60 basis points to about 4.20%, while Germany’s is only around 20 basis points higher.
The motivating idea is that with the US labor market and consumers showing surprising resilience, the Fed is backing away from cutting interest rates further in short order. The European Central Bank remains on track to deliver additional rate cuts as its economy slows.
“We are positioning for US rates…
