Many reasons, but here are the main ones I can think of (btw, in EURland convention is the other way, so 30y spreads are +ve)... In EUR, it's because Depfa/Dexia and their ilk are gone, so the usual, carry-driven buyers of long-dated govt assets have disappeared. Obviously, the root cause there is the lack of funding/balance sheet.Also, there's been lots of flattening in swap land, in USD and EUR both, due to big flows from exotic gamma hedgers.Fundamentally, though, given that the govts everywhere are bailing people out left and right (UST issuance for next year is $1.5 - $2trn), why would you own govt bonds here? It makes sense to me.
Last edited by Martinghoul
on December 15th, 2008, 11:00 pm, edited 1 time in total.