US-German two-year yield spread hits lowest since October 2017

• The US-German bond yield differential narrows to lowest since October 2017. 
• The narrowing of yield spread has failed to put a bid under the EUR. 

The spread between the US and German two-year government bond yields fell to 232 basis points on Wednesday – the lowest level since Oct. 25, 2017.

Notably, the yield differential is down 126 basis points from the high of 358 basis points registered in August 2018. 

Even so, EUR/USD is nursing 3.61% losses on a year-to-date basis, having dropped by 4.66% in 2018. 

The data indicates the correlation between the two-year yield differential and EUR/USD has broken down.

Two-year yield spread