As US curve bear flattens with xccy swap costs it must be low/neg carry
for Eurozone banks to hold treasuries and swaps. They bought ~USD600bn
of Treasuries after 2012 as part of EU QE leakage and swap spreads also
went negative.
Unwind of this is pressuring the
USD/ Euro exchange rate, pushing swap spreads to positive and pushing up
the overall belly of the US curve?
This is transmission of QE unwind/ Fed rate hikes.
Thought Kevin Muir's comments here were interesting:
https://www.themacrotourist.com/posts/2018/01/24/swapspreads/
EU QE leakage:
http://strategicmacro.blogspot.co.uk/2017/04/ecb-qe-leaked-into-treasuries-in-xccy.html
Treasury holders:
http://ticdata.treasury.gov/Publish/mfh.txt
Just looking through the numbrs above the main EU countries and Cayman have bought about $100bn more in the year to November. Cayman is flattish YoY but should be a source for a fair amount of the EU holding.
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