German yields set to stabilize – Danske Bank

According to analysts from Danske Bank, the global bond sell-off is set to take a pause for now. But they also warn that risk appetite is the unknown factor.

Key Quotes: 

“If everything plays out positively and we get a smooth Brexit, a comprehensive trade deal and better global growth data there could easily be more upside for yields. We take a more cautious view here. A lot of good news is priced into financial markets in our opinion.”

“We expect German yields to stabilise around the current level after the recent rise. The combination of a still weak economic cycle, monetary easing by the ECB – not least QE – and the ongoing struggle by investors to avoid negative yields points in that direction.”

“We have lifted our 3 and 6 months forecast some 30bp for the 10Y Bund yield. We continue to see 10Y bund yields slightly higher on a 12M horizon as the cyclical outlook is expected to improve in the second part of 2020. We expect that 10Y Bund yields will hit zero on a 12M horizon.”