Spread Widening

February 21st, 2017 6:32 am | by John Jansen |

An excerpt from morning note by Marc Chandler of Brown Brothers Harriman:

The 10-year French premium over Germany has widened to 80 bp, the most since August 2012.  It has risen nearly 14 bp since the middle of last week.  The two-year spread is also widening.  It is at 44 bp today, the widest since May 2012.  It is up about 16 bp over the last four sessions.  The five-year credit-default swap was at 68 bp yesterday, up from 38 bp at the end of last year and 42 bp at the end of January.  The sell-off in French debt instruments has reportedly come on high volume.

The demand for German paper, not only emanating from flows out of France but the periphery more general, has seen the German two-year note fell to a new record low (~-88 bp).  This in turn has widened the spread between the US and Germany.  The US two-year premium took out the end of last year’s high (~205 bp) today to make a new post-2000 high.

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