As the Federal Reserve moves to end its debt purchases, U.S. bond-market bulls are discovering a new ally: European Central Bank President Mario Draghi.
For the first time since 2007, Treasuries offer higher yields than government debt in Europe. That’s largely due to Draghi, who pushed the region’s borrowing costs to record lows after announcing an unprecedented set of stimulus measures last month including negative interest rates to prevent deflation.
With Fed Chair Janet Yellen trying to extricate the central bank from more than five years of its own extraordinary monetary policies to support the world’s largest economy, the relative advantage may help attract more overseas investors to Treasuries and prolong their biggest advance in four years. At 2.47 percent, 10-year notes yield more than twice as much as German bunds, the biggest premium since 1999.