Trump’s comeback: European bond markets seen as safe haven
Believe it or not, Donald Trump’s return to the White House might just be good news for Europe’s fixed income markets. While U.S. investors brace for renewed protectionism and inflation risks, Europe’s debt landscape is showing signs of resilience—possibly even appeal.
Chart of the week: looking past the elephant in the room
The workings of financial markets never cease to amaze from time to time. Especially when they decide to systematically deny the elephant in the room. Equity investors are often blamed for this behaviour, but high-yield investors can also have some of it at the moment.
If there is anything consensus after the demise of Silicon Valley Bank, it is surely that the outflow of bank deposits is leading to tighter lending requirements. Not least because loan-to-deposit ratios have increased.
‘Equities are a lost cause. Don’t trust this rally.’
While interest rates in the bond market are rising uninhibitedly, the stock market may be in a dead-cat bounce, or a “sucker-rally”. Some market specialists do not trust the rally and declare equities “a lost cause”. In terms of allocations, the traditional appeal of a 60-40 portfolio appears to make a comeback now that the ‘earnings yield spread’ between stocks and bonds is narrowing.
In Flux: A black Bloomsday
Luxembourg has witnessed that European integration still has its limits, even when war rages on Europe’s doorstep.
As world markets digested the Federal Reserve’s rate hike and the ECB’s emergency meeting, finance ministers of the 19 eurozone countries met at the EU conference centre on the Kirchberg plateau in Luxembourg and passed on an opportunity to further integrate financial services. Plans to complete Banking Union, first agreed in 2013, are now sent back to the drawing board.
'Defending eurozone spreads clears path for rate hikes'
Following an emergency meeting of its governing council, the European Central Bank on Wednesday said it will bring forward its plans to create a new instrument that will prevent fragmentation between the 19 economies in the eurozone.
Is a recession on the way?
The yield curves on the global bond markets flattened dramatically during the second half of October. When flattening is followed by inversion of the yield curves, a recession is inevitable. This ominous development is causing concern in the market, but are the concerns justified?