In the last four days much has been made of Swiss and German short-dated bonds moving negative as investors seek the preservationist path of least resistance but perhaps even more critically, the real flight to safety globally has been from Europe to the US. The spread between 10Y US Treasuries and 10Y German Bunds has collapsed the most in over 3 months in the last few days as the world and their pet rabbit jump to front-run Bernanke and seek the safety of the most print-worthy currency in the world. Notably though, 2Y Treasuries are at their cheapest (widest spread relative) to German 2Y since Q3 2007! It appears domestic European capital is flooding into short-dated Bunds and any foreign money is being repatriated back to longer-dated US Treasuries.
10Y Treasuries bid over 10Y Bunds
[4]
with the biggest 4-day compression in over 3 months...
[5]
But 2Y Treasuries are near their wides relative to German 2Y...
[6]
as domestic European cash runs to Germany and everything else floods back to US Treasuries...
Charts: Bloomberg