Mecklai graph: US 10-year bonds, safest heaven

Mecklai graph of the day: Safest heaven

The US 10-year yield approached an eight month high over the same-maturity German bunds on speculation the U.S. economy will grow faster than Europe’s in 2013. The spread widened to 41 basis points on Dec. 18, which was the most since April. German bonds advanced this year as Europe’s debt crisis drove demand for the relative safety of the nation’s securities.

In the recent past, Treasuries lagged as the U.S. unemployment rate fell to 7.7 percent in November, the lowest level since 2008. The economy has recovered pretty well despite looming concerns of fiscal cliff. It is expected to expand 2 percent in 2013 versus 0.8 percent for Germany. All in all, data suggests that traders and investors all over the world are expecting US economy to do better than Europe and uncertainty in the latter will remain for most part of next year as well. Going ahead, German bunds will be the preferred investment destination despite yielding negative returns even as euro leaders mull over ways to get out of maze of euro-crisis.

Below graph compares US ten yields with German ten year yield since Jan 2012

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