Dollar Carry Trade May Be Returning as Global Rates Diverge
- Nomura sees scope for euro to settle into $1.10-$1.135 range
- Treasury-bund 2-year yield spread is near an all-time high
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Speculation that euro-area monetary officials will consider more stimulus for banks and expectations for further Federal Reserve tightening are causing spreads between U.S. and European debt yields to widen, adding to the case for euro weakness, according to Nomura Holdings Inc.
The gap on 2-year Treasury yields over their German counterparts this month surged to about 3.5 percentage points, a record. For Bilal Hafeez, Nomura’s global head of Group-of-10 foreign-exchange strategy, the size of the spread may be enough to spur a carry trade into the dollar.