zerohedge.com / by Tyler Durden / Feb 22, 2017 6:59 AM
The ongoing scramble for German safety away from French political uncertainty, has led to yet another blow out day for German 2 Year Schatz, with the yield tumbling to a fresh all time low of -0.92%, as Eurozone breakup concerns have spread from the bond market, and are now pressuring the euro sending the EURUSD below 1.05 for the first time in over a month.
The rush into German paper and out of France, means that the 10Y Greman-French spread has topped 0.8%, the widest in over four years, while the 2Y US-German spread is now well over 2%, the widest since at least 2000.
Granted, there was a brief moment of respite moments ago, when France 10Y Bonds briefly rallied after the latest OpinionWay poll found momentum for Le Pen stalling, sending French 10y bonds higher, and the yield lower as much as 5bps before paring loss to 2bps, although that burst of optimism appears to have quickly faded.
Adding to the German bid are signals that the ECB is buying German bonds, in particular those with a yield below the -0.4% deposit rate. With investors holding off selling their short-end German debt as they are used as collateral to receive cash at the ECB, fears have reignited of a collateral squeeze similar to late in 2016 which Draghi attempted, and failed, to address in the December ECB meeting.
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