9 Mar 2015
German Bunds are the markets beacon – MP
FXStreet (Barcelona) - With Draghi’s bond buying program off to a start, Dean Popplewell, Director of Currency Analysis at MarketPulse, comments that investors should be following the German 10-year Bund for greater clarity into the European bond market.
Key Quotes
“Euro stocks have garnered a large percentage of their support this year once the ECB announced their QE intentions back in late January. Now that Draghi and company’s bond buying program officially begins today, will investors who have bought the ‘rumor’ consider selling the ‘fact’?”
“On the first day of the program Euro officials have been reported buying German, French and Belgium bonds this morning – this is allowing the rally on euro bonds to be extended.”
“Investors should follow the German 10-year Bund for greater clarity. With record low-yields, even negative yields will remain the order of the day within the Eurozone fixed income class. Do not be surprised to see German 10-year product finally trading through zero and into negative territory with the ECB’s deposit rate acting as the floor (-0.2%). It’s only then things will become interesting in Eurozone bond market.”
“The market continues to expect the semi-core bond markets of Austria, Netherlands and Finland to follow the move lower on German Bund yields. Currently, the peripheral bond market spreads are still sharply wider than their pre-crisis average. Do not be surprised to see the market attempt to tighten those spreads.”
“From the ECB’s perspective it’s always easier to deliver a stronger impact when there is uncertainty over the reaction function.”
“As markets become accustomed to QE and learn the rules of the game it will be interesting to see if the ECB/NCB’s will change the way in which QE is being implemented. For now its the blind leading the blind.”
Key Quotes
“Euro stocks have garnered a large percentage of their support this year once the ECB announced their QE intentions back in late January. Now that Draghi and company’s bond buying program officially begins today, will investors who have bought the ‘rumor’ consider selling the ‘fact’?”
“On the first day of the program Euro officials have been reported buying German, French and Belgium bonds this morning – this is allowing the rally on euro bonds to be extended.”
“Investors should follow the German 10-year Bund for greater clarity. With record low-yields, even negative yields will remain the order of the day within the Eurozone fixed income class. Do not be surprised to see German 10-year product finally trading through zero and into negative territory with the ECB’s deposit rate acting as the floor (-0.2%). It’s only then things will become interesting in Eurozone bond market.”
“The market continues to expect the semi-core bond markets of Austria, Netherlands and Finland to follow the move lower on German Bund yields. Currently, the peripheral bond market spreads are still sharply wider than their pre-crisis average. Do not be surprised to see the market attempt to tighten those spreads.”
“From the ECB’s perspective it’s always easier to deliver a stronger impact when there is uncertainty over the reaction function.”
“As markets become accustomed to QE and learn the rules of the game it will be interesting to see if the ECB/NCB’s will change the way in which QE is being implemented. For now its the blind leading the blind.”