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2025-12-17 17:07:19
[Italian Bonds Become "Expensive" and the Steep US Treasury Curve: Market Deviations Captured by Quantitative Models] ⑴ After directional adjustment for yield spreads, 10-year Italian government bonds appear overvalued compared to 10-year German government bonds. ⑵ Based on a two-month constant yield to maturity regression model, 10-year Italian bonds are 3.6 basis points more expensive than beta-adjusted 10-year German bonds, a deviation of 2.1 standard deviations. ⑶ After directional adjustment, the spread between 5-year and 10-year yields in the US Treasury curve appears quite steep. ⑷ Based on a three-month constant yield to maturity regression model, 10-year US Treasury bonds are 3.5 basis points cheaper than beta-adjusted 5-year US Treasury bonds, also a deviation of 2.1 standard deviations. ⑸ The above quantitative models show significant pricing deviations between bonds of different maturities and types, potentially indicating short-term market rebalancing pressures and potential trading opportunities.
