Since the common currency's inception in 1999, the EUR-hedged yield 'offered' to European investors from investing in US Treasuries has never been worse...
As Bloomberg notes, for European investors using swaps to protect against currency swings, the benchmark 10-year U.S. yield fell Friday on a euro-hedged basis to around -60bps.
In other words, it costs European investors 60bps per year to 'own' 10Y Treasuries on a EUR-hedged basis.
That’s a record low yield in data going back to the common currency’s debut in 1999, and a far cry from the 2.35 percent available to those purchasing the note unhedged.
Meanwhile, everyone is long Europe...
And long the long-bond...
But, while European investors may not be so enthralled with buying hedged Treasuries, as we noted earlier in the week, domestically, TINA is dead... In a sign the U.S. equity rally may be looking stretched, Bloomberg notes that the forward dividend yield on the S&P 500 has dropped below the return on Treasuries for the first time since 2011.
Shares in Europe and Japan, by contrast, continue to yield well above their equivalent government bonds.
Here's what happened the last time the spread between Forward dividend yields and treasury yields was this wide...
To make matters worse for income investors: the Bank for International Settlements warned in its recent quarterly review that U.S. stock valuations are looking “frothy” and dividend growth may slow.