16 Jun 2015
Bunds could climb further – Danske Bank
FXStreet (Edinburgh) - Analysts at Danske Bank believe the German Bunds still have room for further upside.
Key Quotes
“The sell-off probably reflects profit taking after yields dropped to a historical low”.
“The higher inflation numbers in May and stronger US data, which indicate that the Fed will hike rates in September, together with more upbeat recovery expectations for the eurozone have probably also contributed to higher yields”.
“Furthermore, it seems that the ECB is not overly concerned about the rapid rise in yields and volatility”.
“Poor market liquidity – due to tighter regulation – might have exaggerated the moves in yields this year”.
“However, core inflation is still very low, the QE programme will continue unabated until September next year and Greece might be in focus for a prolonged period of time”.
“Hence, any further upside we see for 10Y rates on a 12M horizon is mainly due to a spill-over effect from US rates, and on a 3M horizon we see basically unchanged yields in the 10Y segment”.
“For lower maturities we see slight downside potential given our view that the ECB will keep policy rates negative for at least two more years”.
Key Quotes
“The sell-off probably reflects profit taking after yields dropped to a historical low”.
“The higher inflation numbers in May and stronger US data, which indicate that the Fed will hike rates in September, together with more upbeat recovery expectations for the eurozone have probably also contributed to higher yields”.
“Furthermore, it seems that the ECB is not overly concerned about the rapid rise in yields and volatility”.
“Poor market liquidity – due to tighter regulation – might have exaggerated the moves in yields this year”.
“However, core inflation is still very low, the QE programme will continue unabated until September next year and Greece might be in focus for a prolonged period of time”.
“Hence, any further upside we see for 10Y rates on a 12M horizon is mainly due to a spill-over effect from US rates, and on a 3M horizon we see basically unchanged yields in the 10Y segment”.
“For lower maturities we see slight downside potential given our view that the ECB will keep policy rates negative for at least two more years”.