Euro/U.S. Dollar and U.S. Treasury Bond Yields
Notice Exhibit 6.5, the chart of the three-month Treasury Bill and two-year Treasury Note along with spreads of each, and further notice Exhibit 6.6, the historic euro/U.S. dollar chart marked exactly as the Treasury chart.
From 2000 to 2002, yields for both were down but so were the spreads and the euro/U.S. dollar hardly moved. Yet notice the almost 7 percent yield payout for the two-year note and three-month bill. This explains the no-movement aspect. The payout is too expensive for the short end of this curve, especially if present interest rates and reserve requirements aren't in sync to the 7 percent yield.
From 2002 to 2003, yields and spreads were down and the euro/U.S. dollar began its ascent. ...
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