ISMS 15: Top 5 DM Country Interest Rates – Steep US Inversion

Apr 5, 2023

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Developed Countries - Vast DM Country increases in ST and LT rates, Japan stays an outlier, US looks worst based on yield curve inversion

3m yield in US up the most YoY as it started the interest rate hike
USA 3m yield was up 4.4ppts, Japan down 0.2ppts, Germany up 3.2ppts, UK up 3.5ppts, France up 3.4ppts
1yr yield has risen significantly in developed countries; only Japan’s yield didn’t move
USA 1yr yield was up 3.1ppts, Japan down 0.1ppts, Germany up 3.3ppts, UK up 2.7ppts, France up 3.5ppts
10yr yield grew in all developed countries YOY, even in Japan
USA 10yr yield was up 1.2ppts, Japan up 0.1ppts, Germany up 1.8ppts, UK up 1.9ppts, France up 1.8ppts

3m yield has risen steepest in the US
Germany, UK, and France 3m yield follows US, but with a delay
Japan remains an outsider and continues with its negative interest rate policy
1yr yield in developed countries moved up aggressively
However, in March 2023, US 1yr yield dropped for the first time in 12 months
Other developed countries also saw a slight fall recently
10yr yield has risen in all developed countries, but starts to show flattening behavior recently
Since October 2022, the 10yr yield among the developed countries hasn't moved much and stayed flat

3m yield curve inversion in the US widened after the Fed aggressively increased short-term rates
In March 2023, the 3m rate was 1.3 ppts higher than the long-term rate
1yr yield curve in Japan steepened over the past 12 months
Japan is among the few countries that haven’t seen a yield curve inversion
Quite the opposite is true as the differential between 10yr yield and 3m rates doubled over the past 12 months
10yr yield curve in Germany turned into negative territory, but far less severe compared to World
10yr yield curve in the UK also saw a slight widening of its yield curve inversion
10yr yield curve in France flattened massively and seems likely to invert soon

Aggressive ST rate hikes led by the US and followed by European developed countries
LT rates seem to have peaked and fell MoM
Japan with different policy sees almost no movements in both ST and LT rates
US faced steepest inversion among developed countries; Japan maintains positive yield curve