We noted Oct/31 that Germany would not be up to US speed, reminding clients Nov 1 that we had set an anchor, that near term growth in Germany was to come inside of economists’ estimates, Q4, Q1. Since then most German releases have cooperated quite nicely. This, along with the likely shrinkage of loans in response to the EU 9% core capital rule, is motivation to our strategy to sell US debt to this credit.
On Nov/2 we noted that those who felt much of the EU poison had been priced in should set this spread (if not set already). A convenient measure is the 10yr, but of corse the strategy can be worked in any number of ways, FI, FX. Yields in the US, Nov/2 were +16 to Germany, last, + 20. First target, +30.
Robert Craven
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