Bloomberg
Published Dec 06, 2019 09:35
Updated Dec 06, 2019 13:19
Time to Get Tactical on European Rates as Returns Set to Dwindle
(Bloomberg) -- Investors may have to get more tactical in 2020 given the impressive returns from European government bonds this year could become much harder to achieve.
Ten-year German yields may well remain in a broad range. Euro-area cyclical indicators have risen off recent lows and if the U.S. and China reach an initial trade deal then yields will likely reprice higher ahead of economic data improving. However, a strong recovery and higher inflation remains elusive, narrowing the room for yields to increase above 0%.
The space for yields to fall will be limited in the case of a stagnating economy. The bar is high for substantial additional ECB easing given divisions within the Governing Council as arguments grow against negative rates. New record-low yields would likely require a significant economic downturn.
Written By: Bloomberg
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