Economics
U.S. Fears Inflation More Than Europe, With Recovery in Balance
- Spread between Treasuries and bunds has been trading sideways
- ECB, Fed and BOE take hawkish approaches, but with differences
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Europe is far less concerned about inflation than the U.S., and that could create key divergences in how the global recovery plays out.
Today’s Chart of the Day illustrates the difference in inflation on both sides of the Atlantic. Specifically, the spread between 10-year Treasury yields and German bunds, a proxy for the growth and inflation outlooks in the U.S. and Europe, has pulled back. It rose for much of 2020 in response to a halted global economy reviving, with the U.S. taking the lead. But it’s traded sideways for much of 2021, once again as a function of range-bound yields as inflation continues to rise and hawkish monetary policy gets priced in.