Yes, the steepening in the German yield curve can continue without a corresponding move in the Treasury curve. Whether it does depends partly on how the selection of the next ECB president plays out. The politics of the appointment still have a long way to go as Mario Draghi doesn't step down until October 2019. However, the appointment of Spain's Luis de Guindos as ECB vice president makes it more likely that Germany's Jens Weidmann, a hawk, will succeed Draghi as ECB president.
For investors, that could mean that any euro rate hikes are left until the new man is in the top seat. Which provides plenty of time for the ECB to be perceived as being behind the curve as inflation creeps higher. When that sentiment sinks in, a wider spread between two-year and 10-year yields is the safety valve, regardless of where Treasuries are going.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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