Slow export of reflation must widen the Treasury-Bund spread

We see 2021 as a year in which the spread between the German and the US 10yr continues to re-widen. This is a classic reflation/recovery type occurrence. US rates volatility is typically higher than that of eurozone rates, and during periods of rising markets rates, the US tends to do most of the heavy lifting to begin with, which would result in a wider spread between US market rates and eurozone ones.

While negative rates have served the purpose of providing ultra-low financing conditions, they are also not a desired outcome

And this is important for eurozone yields, as higher US yields can help to pull the eurozone ones up too; which is a good thing. The German 10yr yield at -50bp does not paint a positive picture for the eurozone medium-term outlook. In contrast to that, the ambition for the US 10yr to nudge above 1% takes it clear of the depths that German yields find themselves in.

While negative rates have served the purpose of providing ultra-low financing conditions, they are also not a desired outcome as higher yields usually mean better things in terms of underlying macro circumstances.

We don't see this as being a consequence of more supply. That might come. But for now, the dominant pull on market yields is a reflationary 2021.