As the euro zone flirts again with monthly deflation prints, U.S. 10-year 'real', or inflation-adjusted, yields have fallen back below euro zone equivalents. The premium on the benchmark French 10-year OATi over the U.S. 10-year TIP is now bigger than it's been in 7 years. The evaporation of the Transatlantic real yield gap helped lift euro/dollar above $1.20 briefly on Tuesday for the first time in more than 2 years - with some wondering if European Central Bank will start to worry about a vicious circle of deflation fears and further euro strength. The ECB meets again on Sept 10.
Chart by Ritvik Carvalho and commentary by Mike Dolan.
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