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.”
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