The US may enjoy the privilege of printing the world’s reserve currency, but the UK currently enjoys lower government borrowing costs – and by the widest margin in almost six years.
The US has usually been able to borrow more cheaply than the UK, and particularly so since the financial crisis, which spurred investors to dump risky assets and pile into those perceived to be the safest in the world: US Treasuries.
The benchmark 10-year bond yields of both countries have climbed from their record lows in recent weeks, but the move has been more subdued in the UK.
This pushed the difference between London and Washington’s 10-year borrowing costs to as much as 15.6 basis points in the UK’s favour on Tuesday, the widest since October 2006, although trading volumes have been light on both sides of the Atlantic.
The disparate economic outlook for the two Anglo-Saxon countries and the implications for central bank action such as quantitative easing, or government bond purchases, have been the main drivers.
A recent uptick in US economic data, particularly in the housing and labour markets, has compelled some investors to pare expectations that the US Federal Reserve will unveil a third round of quantitative easing , or QE3, next month.Page 1 of 4 | Next Page