26 Mar 2015
European yields may bottom out in the coming months – ING
FXStreet (Barcelona) - Peter Vanden Houte, Chief Economist at ING, believes that with ECB QE purchases on-going and Fed set to hike in this year, European yields may bottom out in the coming months.
Key Quotes
“We remain wary of pencilling in yields at rock-bottom levels for the whole of the year. Indeed, if the ECB’s aim to push inflation expectations higher and sustain growth is realised, one should expect slightly higher yields.”
“As the ECB is now pencilling in close to 4% nominal GDP growth in 2017, it would seem a bit ambitious to expect 10yr yields to remain below 1% until then.”
“On top of that, with the Fed likely to tighten by the summer of this year, US bond yields could also drift slightly higher, to some extent slowing or even reversing the downward trend in bond yields in Europe.”
“We see European bond yields bottoming out in the coming months. That said, 2015 is unlikely to see a strong upward move in interest rates. That probably will have to wait until 2016.
Key Quotes
“We remain wary of pencilling in yields at rock-bottom levels for the whole of the year. Indeed, if the ECB’s aim to push inflation expectations higher and sustain growth is realised, one should expect slightly higher yields.”
“As the ECB is now pencilling in close to 4% nominal GDP growth in 2017, it would seem a bit ambitious to expect 10yr yields to remain below 1% until then.”
“On top of that, with the Fed likely to tighten by the summer of this year, US bond yields could also drift slightly higher, to some extent slowing or even reversing the downward trend in bond yields in Europe.”
“We see European bond yields bottoming out in the coming months. That said, 2015 is unlikely to see a strong upward move in interest rates. That probably will have to wait until 2016.