When a foreign government bond has a spread below a US Treasury yield, what does it fundamentally indicate?
Answer:
I'm not sure exactly what you're asking; but it will effect the exchange rate.
If the foreign rate is below the US rate; the real exchange rate for the foreign country should be lower.
i think it would indicate that this FOREIGN government (issuing the bond) is trying to force their money out of the domestic circulation. It could mean that this economy is doing too well, that they have to redirect their money in to international channels to avoid their economy to over heat.
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