US Treasury 10Y-3M Slope Declines As Dow Drops > 900 Points As German Sovereign Curve Negative Out To 25 Years

As fears of the Covid Delta Variant sink in, we are seeing a flight to quality. The 10Y-3M Treasury curve slope is declining.

But the US Treasury actives curve remains upward sloping as does the on/off the run curve.


While the US Treasury curve (green) is upward sloping and all yields above zero, Japan’s sovereign curve is negative in tenors of less than 10 years. Germany has negative sovereign yields for tenors less that 25 years.

The big three Central Banks are expanding like crazy.

The Dow in down > 900 points

Graphically, the Dow is dropping alongside 10Y Treasury yields as investors flee to quality.

Paging Fauci for a lecture of Covid and more “go big” talk from Treasury Secretary Yellen.

Release The Kraken! China Cuts Reserve Ratio By 0.5% Releasing 1 Trillion Yuan In Liquidity To Boost Economy (Europe Has 20 Nations With Negative 2Y Sovereign Yields)

Release the Kraken!

The People’s Bank Of China announced it is cutting its Required Reserve Ratio by 0.5% for most banks, a move that will unleash about 1 trillion yuan ($154BN) of long-term liquidity into the economy and will be effective July 15. The announcement reduces the amount of cash most banks must hold in reserve in order to boost lending to the economy as growth has sharply waned, and is expected to prop up China’s slowing economy, their Caixin Service PMI drop to the lowest level since the covid crisis, badly missing expectations.

Bear in mind that the cut in the reserve ratio is from 12.5% to 12%.

In the USA, As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020.  This action eliminated reserve requirements for all depository institutions.This action eliminated reserve requirements for all depository institutions.

How are things in EMEA (Europe, Middle East and Africa)? At the 2 year mark, Lebanon has a 2-year sovereign debt yield of 156.727%. Meanwhile 20 EMEA nations have negative sovereign debt yields. ECB’s Christine Lagarde just can’t say no to negative interest rates.

How about North, Central and South America? Brazil has the highest 2-year sovereign yield while Argentina and Venezuela has 0% yields (denominated in US Dollars). Panama has negative 2-year sovereign yields.

How about Asia where Japan has a negative sovereign yield on its 2-year of 0.-124%. China’s 2Y sovereign yield is 2.529% compared to the USA 2-year Treasury Note yield of 0.205%.

Many nations have moved to either negative of near zero 2-year sovereign yields.

This is Milton.