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A massive flight to quality has left US 10-Year Treasury Bond Yields at their lowest levels on record—further emphasizing extreme risk aversion in global financial markets. Banks and other financial entities unwilling to lend to one another have desperately sought safe haven for funds, and US Government debt has largely been the instrument of choice for many investors. Such flows have not resulted in net demand for US Dollars, however, as we have actually seen the US currency fall substantially against major forex counterparts.
US Treasury Bond Yields Hit Record Low
The Euro/US Dollar pair has actually moved lock-step with 10-Year Treasury Bond prices through the past several weeks of trading. Bond prices move inversely to yield, and this chart shows us that falling Treasury yields have coincided with Euro/US Dollar gains. Whether or not this is a lasting shift remains to be seen, but record-low Treasury yields can intuitively hurt demand for the US Dollar.
US Treasury Bond and the US Dollar
Written by David Rodríguez, Quantitative Analyst for DailyFX.com
To contact the author of this report, e-mail drodriguez@dailyfx.com
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