Dollar Break With Yields Prompts Concern U.S. Has Funding Issue
- Moves by other central banks prompt pullback for greenback
- Some suggest worries about U.S. deficit financing are at play
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Not since the 1980s have U.S. Treasuries had such handsome yield premiums over their German counterparts. Yet that’s not helping the dollar, in a disconnect that’s raising concern about the international willingness to finance American borrowing.
Prospects for central bank tightening, emergent inflation and solid growth have boosted government bond yields across developed markets this month -- but particularly in the U.S., where the 10-year spread over German bunds now exceeds 2.6 percentage points. Wider gaps were only seen in the late 1970s and 1980s, when American inflation averaged 3 percentage points higher than in Germany (versus little difference now), Commerzbank AG says.