What scenario for government bonds (and bonds) between now and the end of the year?

Gov. bonds and Spread

Posted by MoneyController on 24.06.2024

  • 236
  • 0
  • Follow me

On 6 June, the ECB cut interest rates by 0.25%: the deposit rate therefore fell from 4% to 3.75%. Also in light of inflation and the current economic scenario, what are the prospects for the European bond market?

The consequences of the European elections in France

The results of the European elections had important national consequences, especially in France, where new elections have been called. In this regard, in an article by Sandra Riccio that appeared in 'La Stampa', one can read some considerations by Richard Flax, Chief Investment Officer of Moneyfarm: the manager points out that the elections follow a downgrade of France by S&P.

Markets and French public debt

Moreover, as far as financial markets are concerned, the news of new elections seems to have raised fears that a new majority in France could lead to an increase in public spending, with consequences for debt sustainability (although today the spread between French 10-year bonds and German bonds is still far from the record levels of 2022, Flax explains).   

An improving scenario for government bonds?

Riccio's article in 'La Stampa' also reports some considerations by Francesco Castelli, Banor's bond manager: the manager first of all speaks of an improving situation for government bonds (also thanks, Riccio seems to suggest, to the start of the cautious policy of interest rate cuts by Christine Lagarde's European Central Bank).

Outlook on bonds

Castelli, however, also makes some observations on the fixed income market. Firstly, he points out that spreads had already narrowed somewhat in the run-up to the first interest rate cuts. Nevertheless, Castelli believes that it remains important to consider both yields and the quality of bonds. The manager also points out that some government bonds offer positive real yields, but that their outlook for the second half of the year is to "catch up" in the more general bond environment.

Read also:

US stock markets in the negative: is the retreat beginning?

French and European elections shake up markets, but only perhaps in the short term

What awaits investors in the second half of the year?

TODAY’S MOST READ ARTICLES

MOST READ ARTICLES OF THE WEEK

MOST READ ARTICLES OF THE MONTH

MOST READ ARTICLES IN THE FINANCIAL FORUM

View classification