Jump in U.S. Yields May Not Lure Foreign Cash, and Here's Why
- Europe, Japan investors seen facing higher hedge costs in 2018
- Increase comes just as U.S. Treasury poised to boost supply
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Treasuries are offering the highest yields in four years -- and a multiple of those in Japanese and European bond markets. But don’t expect foreign buyers to be breaking down the doors to U.S. debt auctions.
The problem is that overseas buyers are facing mounting costs to protect their bond positions from swings in foreign exchange markets. And given the potential for trade conflicts and monetary-policy shifts to spur currency volatility around the world, there are plenty of reasons to have that insurance.