bdavi77962

You seem to be over thinking this.
Let’s say the US bond is yielding 10% pa ( or 2.5% for the next 3 mths) and the German bond is yielding 7% pa  (or 1.75% for the next 3 mths). Now if you had bought the German bond you would be 75 bps down on the other option (the US bond). If interest rates on (only) the German bond were then to drop by 0.09% then, as we know that the duration is 8.3 (or an 8.3% change in bond price for a 1% change in yield) we know that the German bond will earn 8.3 x 0.09% = 0.75% in capital gain from the fall in interest rates of 0.09% on this bond and the total return will be 1.75% (yield) plus 0.75% (capital gain) for a total return of 2.50% and the same (breakeven) return as the US bond.
Make sense now?