While stronger economic growth and an expectation that the scheme will be scaled back in coming months have pushed bond yields higher over the past year, a large chunk of the market remains in negative territory.
According to JPMorgan Asset Management, 36 percent of government bond yields in the euro zone are below zero, compared with a peak in June 2016 of 51 percent.
For bond strategists,
another example of how the ECB’s quantitative easing programme has inflated government bond prices in the bloc is to compare Italian bonds against U.S. Treasuries.
Ten-year bond yields in Italy, a lower-rated sovereign that is often viewed as one of the weakest links in the euro area, have traded below U.S. Treasury yields for almost the entire period since the ECB signalled in late 2014 that it would start buying bonds to boost inflation and growth.
See chart below.
“
It’s hard to say there isn’t some kind of over-inflated asset prices,” said Iain Stealey, senior fixed income manager at JPMorgan Asset Management.
“
You’ve got negatively-yielding government bonds in an economy that is growing at a nominal growth rate approaching 4 percent. So there is a disconnect.”
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The euro's 14 percent surge against the dollar this year, its biggest annual rise since 2004, has turned around market expectations, and euro/dollar is the most crowded trade in the currency markets.
Figures from the U.S. Commodity Futures Trading Commission (CFTC) show that
hedge funds and other speculators now hold the biggest net long euro position since May 2011.
Morgan Stanley’s own surveys show 93 percent of currency traders are bullish on the euro against the dollar, but some market watchers saying that kind of positioning is unlikely to be sustained for long.
“We think the euro has gone too far in too short a period and that should remain a worry for policymakers,” said Richard Falkenhall, a senior currency strategist at SEB.
A concern for some is that the euro’s steep appreciation has drawn in non-euro zone investors to the zone’s assets and flattered both the inflows and the returns in debt and equity. Any sudden currency reversal could have ripple effects across euro markets as result, even if economists would ultimately see that as a boon for growth.
Bubble-spotting in Europe
che aspettavo da tempo , adesso vediamo la prossima settimana le quotazioni dove potranno arrivare. Diventando, a questo punto, il Portogallo un investiment-grade, i fondi si riposizioneranno su di di esso, alme spero. Buon fine settimana.
