Developed Countries - Vast DM Country increases in ST and LT rates, Japan stays an outlier, US looks worst based on yield curve inversionInterest rate overview

• US 3m yield 4.9%, Japan -0.3%, Germany 2.6%, UK 4.1%, France 2.8%
• US 1yr yield 4.7%, Japan -0.1%, Germany 2.9%, UK 4.0%, France 3.0%
• US 10yr yield 3.6%, Japan 0.3%, Germany 2.3%, UK 3.5%, France 2.8%

Year-on-year changes

• 3m yield in US up the most YoY as it started the interest rate hike
• USA 3m yield was up 4.4ppts, Japan down 0.2ppts, Germany up 3.2ppts, UK up 3.5ppts, France up 3.4ppts
• 1yr yield has risen significantly in developed countries; only Japan’s yield didn’t move
• USA 1yr yield was up 3.1ppts, Japan down 0.1ppts, Germany up 3.3ppts, UK up 2.7ppts, France up 3.5ppts
• 10yr yield grew in all developed countries YOY, even in Japan
• USA 10yr yield was up 1.2ppts, Japan up 0.1ppts, Germany up 1.8ppts, UK up 1.9ppts, France up 1.8ppts

Rate progression

• 3m yield has risen steepest in the US
• Germany, UK, and France 3m yield follows US, but with a delay
• Japan remains an outsider and continues with its negative interest rate policy
• 1yr yield in developed countries moved up aggressively
• However, in March 2023, US 1yr yield dropped for the first time in 12 months
• Other developed countries also saw a slight fall recently
• 10yr yield has risen in all developed countries, but starts to show flattening behavior recently
• Since October 2022, the 10yr yield among the developed countries hasn't moved much and stayed flat

Yield curve

• 3m yield curve inversion in the US widened after the Fed aggressively increased short-term rates
• In March 2023, the 3m rate was 1.3 ppts higher than the long-term rate
• 1yr yield curve in Japan steepened over the past 12 months
• Japan is among the few countries that haven’t seen a yield curve inversion
• Quite the opposite is true as the differential between 10yr yield and 3m rates doubled over the past 12 months
• 10yr yield curve in Germany turned into negative territory, but far less severe compared to World
• 10yr yield curve in the UK also saw a slight widening of its yield curve inversion
• 10yr yield curve in France flattened massively and seems likely to invert soon

Key points

• Aggressive ST rate hikes led by the US and followed by European developed countries
• LT rates seem to have peaked and fell MoM
• Japan with different policy sees almost no movements in both ST and LT rates
• US faced steepest inversion among developed countries; Japan maintains positive yield curve

 

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