There's Never Been A Worse Time For A European Investor To Buy US Treasuries

Since the common currency's inception in 1999, the EUR-hedged yield 'offered' to European investors from investing in US Treasuries has never been worse...

As Bloomberg notes, for European investors using swaps to protect against currency swings, the benchmark 10-year U.S. yield fell Friday on a euro-hedged basis to around -60bps.

In other words, it costs European investors 60bps per year to 'own' 10Y Treasuries on a EUR-hedged basis.

That’s a record low yield in data going back to the common currency’s debut in 1999, and a far cry from the 2.35 percent available to those purchasing the note unhedged.

Meanwhile, everyone is long Europe...

And long the long-bond...

But, while European investors may not be so enthralled with buying hedged Treasuries, as we noted earlier in the week, domestically, TINA is dead... In a sign the U.S. equity rally may be looking stretched, Bloomberg notes that the forward dividend yield on the S&P 500 has dropped below the return on Treasuries for the first time since 2011.

Shares in Europe and Japan, by contrast, continue to yield well above their equivalent government bonds.

Here's what happened the last time the spread between Forward dividend yields and treasury yields was this wide...

To make matters worse for income investors: the Bank for International Settlements warned in its recent quarterly review that U.S. stock valuations are looking “frothy” and dividend growth may slow.


Ghordius Mon, 12/18/2017 - 04:40 Permalink

a few years ago the standard comment on ZH about the EUR was something in the tune of "will break up in a few weeks, max"

now, years later, it has become more on the tunes of

- "Jews, Jews, Jews, rah, rah, rah" and

- "Forward Judean-Christian Warriors onto the War On Islam" and...

the two groups of troglodytes don't even notice each other. meh. there is a kind of pull for Confirmation Of Bias that is simply irresistible

ThirdWorldNut Blue Steel 309 Mon, 12/18/2017 - 05:57 Permalink

Ghordius, I dare you to stand anywhere in Greece and exclaim - "EU is doing great". And I know your counter arguments too -Either - all EU's failures are because there is not enough integration aks surrender of sovereignity to the polit bureau.Or - EU is still better than USA.The first argument is page 1 from any deluded despot who ignores all warnings and still sprints towards abyss.The second one is hardly a consolation, because (a) vast majority of world lives outside US and (b) when SHTF odds of a civilians led purge are much higher in USA then cucked up, guilt ridden EU pseudo-males. 

In reply to by Blue Steel 309

Ghordius ThirdWorldNut Mon, 12/18/2017 - 06:48 Permalink

rubbishI dare you to stand anywhere in Greece and exclaim: "All Greece's problems would be solved if Greece would exit the EUR"and take cover for all the garbage you would be thrown atfurther"all EU's failures are because there is not enough integration aks surrender of sovereignity to the polit bureau. "wrong. that's what our EU Federalists argueand that "EU is still better than USA" is just projection from your side

In reply to by ThirdWorldNut

Sudden Debt Blue Steel 309 Mon, 12/18/2017 - 06:06 Permalink

It's actually pretty closer then most think :)It's beginning to dawn that a lot of countries have a shitload of debt that they'll never be able to repay andit's also beginning to dawn that future obligations are a fraud. I got a letter 2 weeks ago where I COULD BUY RETIREMENT YEARS!yep... from the government....FOR EVERY 1500 EURO'S I PAY NOW, I CAN RETIRE 1 YEAR EARLIER.sounds good right? buying 10 years sounds like a good investment no?My pension would be arround 2K dollars a month so it sounds like the perfect investment but IF YOU DO THE MATH, THAT'S 2K DOWN TO RECEIVE 24K A YEAR EARLIER!ehe...They really need the money to cover current obligations.I have friends who received the same letter, nobody is going to do it. They all realise we'll never get the money and money needs to be taken out of the system now.But the average person has no clue. They know it will implode, everybody knows that  but somehow they still don't understand that  there will NOT be a replacement for that money. They will receive nothing. So how the hell will they retire?And looking arround me, in my Country a lot of people are old. It will be carnage. Last week, there was a debate where economists finally agreed that Belgium is in worse shape then Greece right'd think people would talk about that right?to bad nobody watches these economic debates on sunday... And somehow if you want to talk to somebody about this, their eyes are looking for an exit. People really don't want to hear it.So it will be somehow deserved when the system over here implodes. And I'll smile every time somebody says "WHY DIDN'T THEY EVER MENTION THIS BEFORE?!" But when? About 5 to 7 years. A massive crah would cause it to be a lot earlier.

In reply to by Blue Steel 309

Hkan Sudden Debt Mon, 12/18/2017 - 06:47 Permalink

Experience same thing friends getting frustrated trying real world input. Not a chance...nothing is happening.....not to us...not here...Got physical gold. Good or bad.....ill leave it to the tell.Strange it brings back that old story....from some historybook (ya that long ago and still valid) messenger bringing bad news to the king got killed.Looks like people are the same...whatever historybook page u open.And we are suppose to be at peak of our evolution....rather the opposite..

In reply to by Sudden Debt

Blue Steel 309 Mon, 12/18/2017 - 04:41 Permalink

For the last 5000 years of recorded history, there was never a word in any language for "racism" until the jewis invented it last century. Let that sink in. Jew supremacist want you subjugated at best.

Singelguy Juliette Mon, 12/18/2017 - 08:05 Permalink

They are banking on the premise that the Euro will crash relative to the US dollar. They might be right. The -60 bps they are paying is regarded as a form of insurance premium. The important point is that the -60 bps inficates that the demand is very high, which suggests that hedging strategy may be the correct one.

In reply to by Juliette

MusicIsYou Mon, 12/18/2017 - 06:34 Permalink

I'm just suprised U.S treasuries are worth any fcking thing. It's a country in debt over it's head and has entitlements up the whazoo for a spoiled but unintelligent population that's getting dumber by the month.