Banks

RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Categorized | Economy

European bond slump continues; German 10-yr yields up to 0.3%


Posted on November 18, 2016

The sell-off in European sovereign debt is showing little signs of easing at the end of a rough week.

Bonds are suffering as fears over rising US inflation have pushed up treasury yields to a 2016 high, with investors anticipating a raft of tax cuts and higher spending from president elect Donald Trump. (Yields rise when a bond’s price falls.)

The Republican’s success also seems to have emboldened populist forces in Europe where three of its four largest economies are holding votes in the next 12 months.

That’s all bad news for bond investors, with yields climbing from the record lows hit in the wake of the UK’s Brexit vote.

Here’s a snapshot of where we stand:

  • Germany’s 10-year Bund yield has climbed to 0.314 per cent, gaining 0.14 percentage points so far this month
  • Italian benchmark debt on course for its worst month since 2012
  • UK 10-year gilt yield is at 1.48 per cent – highest pre-Brexit vote level
  • The Portuguese benchmark yield has soared to 9-month high, eyeing 4 per cent level at 3.8 per cent
  • Spain’s 10-year yield has jumped to post-Brexit vote high of 1.66 per cent – set for worst month since mid-2015

Europe’s bond rout has accelerated despite the European Central Bank hinting it will keep pumping record amounts of stimulus into the eurozone beyond March 2017. ECB president Mario Draghi warned today that inflationary dynamics are still not self-sustaining in the eurozone (read more here).

In a worrying sign for policymakers, higher yields are not a reflection of higher growth rates to come in the single currency area, says Charles Himmelberg at Goldman Sachs.

“Expected market returns are likely to remain low as long as investors remain convinced that the growth outlook is anaemic”, says Mr Himmelberg.

“But many of the fundamental drivers behind the declining trends in developed market GDP growth are likely to stay weak for the foreseeable future”.