- 1 min
The spread between US and European rates is at a 30-year high
The US rate reached a 7-year high when it rose to over 3%. The contrast is striking: Germany's bund stands at just 0.6%. The spread between the German and US rates widened to 240 basis points, the highest since 1988. This situation is due to the offset between the US and European monetary policies. Since the end of 2015, the US Federal Reserve has gone back to a traditional policy, with six rate increases, and five or six more planned over the next 18 months.
The US economy's outlook is also more favourable in view of the downturn in Europe, influencing long rates. The difference in inflation forecasts is also playing a significant role. Investors' fears are focusing on the risk of an uncontrolled upward spiral in rates, without giving households and businesses enough time to adapt their behaviour in respect to their indebtedness.
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