18 December, 2008
A massive flight to quality has left US 10-Year Treasury Bond
Yields at their lowest levels on record—further emphasizing extreme
risk aversion in global financial markets.
Banks and other financial entities unwilling to lend to one another
have desperately sought safe haven for funds, and US Government debt
has largely been the instrument of choice for many investors. Such
flows have not resulted in net demand for US Dollars, however, as we
have actually seen the US currency fall substantially against major forex counterparts.
US Treasury Bond Yields Hit Record Low

The Euro/US Dollar pair has actually moved lock-step with 10-Year
Treasury Bond prices through the past several weeks of trading. Bond
prices move inversely to yield, and this chart shows us that falling
Treasury yields have coincided with Euro/US
Dollar gains. Whether or not this is a lasting shift remains to be
seen, but record-low Treasury yields can intuitively hurt demand for
the US Dollar.
US Treasury Bond and the US Dollar

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