ECB QE in frame as Bund yield falls below 1%

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As yield on the German 10-year Bund fell below 1% in the wake of fears of eurozone economic stagnation, Bill Street, head of Investments EMEA at SSgA, said that investors should expect the European Central Bank to put its version of Quantitative Easing back on the agenda.

“Two days of painful data in Europe against a backdrop of Russian tensions have driven up the price of 10 year German Bunds, pushing yields to historic lows of below 1%. The eurozone is now on the brink of Japanese style stagnation – where a lack of inflation and growth has gripped the economy for a decade.”

“Weaker than expected GDP numbers, together with predictable but poor inflation data has triggered this sudden flight to safety. Inflation across wider Europe decreased last month with CPI in the euro-area falling by 0.7% and only rising by 0.4% over the year since July 2013. Poor growth and a deepening deflationary outlook has resurfaced concerns about the long term debt-sustainability of the Eurozone periphery. This is putting QE back at the forefront of people’s minds with investors questioning whether the ECB has the tools, or intent, to do ‘whatever it takes’.”

The development is likely to fan interest in government debt issued by countries seen as safehavens; as of yesterday the yield on Swiss government debt was 0.45%, and on Dutch government debt 1.2%. Swedish government debt saw its yield fall 0.38% yesterday to 1.6%.


Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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