World Bunds Shorten, recommend strategists before the ECB session

12:15  19 april  2021
12:15  19 april  2021 Source:   spiegel.de

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Investing.com - European stock markets are seen opening slightly lower Monday, consolidating from record levels with the corporate earnings season to continue and investors awaiting the latest European Central Bank meeting. Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators. Please wait a minute before you try to comment again.

Many central banks have turned tighter, either by action or by rhetoric; still, all actions were carefully communicated as being gradual, strategists including Hans Redeker, Anton Heese said in client notes. Look for Draghi to reinforce the hawkish signal sent by the speech at Sintra, as it makes little sense for a dovish turn at the July meeting before a taper announcement in September or October, strategists including Andrea Appeddu write in a client note. Root cause of the ECB shift is the technical need to terminate ECB QE buying in 2018 given the 33% legal limit, not the inflation outlook.

(Bloomberg) - with the accelerated vaccine pace in Europe and the prospect of an early opening of the economies, Bondstrategists are increasingly seeing German federal bonds with skepticism and advise to put on price losses.

The ECB is on course to increase its outlook gradually, states in an analysis of Goldman Sachs Group Inc. This signal the tolerance of the central bank for higher returns. Analyst George Cole considers it for unlikely that the central bank will expand its bond purchases and recommends investors who cancel 30-year-old federal government directly.

Citigroup Inc. assesses the situation similar and assumes that some investors already expect a tapering of the ECB bond purchases. Strategists around Jamie Searle remain pessimistic relevant to federal government and expect a return increase to -0.15% at ten-year papers in this quarter.

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Most of those losses occurred well before ECB chief Mario Draghi launched negative rates in June 2014 in a push to accelerate Europe's economy and prevent deflation. But the numbers aren't pretty after that either. Deutsche Bank 's stock has plunged 77% since the ECB announced negative rates. The Euro Stoxx Banks Index, a basket of eurozone lenders, is down by more than 40% since the ECB ventured into negative interest rates. While the eurozone enjoyed a growth spurt in 2017, the economy has slowed significantly of late, in part because of global trade tensions and demographic challenges.

The European Central Bank is turning on the stimulus taps again, pushing interest rates further into negative territory in order to support the region's flagging economy. The meeting on Thursday was Draghi's penultimate as ECB president before he hands the reins to former International Monetary Fund chief Christine Lagarde in November. He used the occasion to make clear that he believed the central bank had done all it could, and it was now time for other policymakers to step up.

German bunds have significantly outperformed Treasuries this year © Bloomberg German Bunds Have Significantly Outperformed Treasuries This Year

If the ECB is not reaffirming its commitment to a loose monetary policy environment at the meeting on Thursday, it could count on the decision in June with a mini-taper tantrum Being, says Ralf Prusser, who at the Bank of America Corp. The global bond strategy leads.

Prusser, which keeps the ECB communication strategy for confusing, expects further improvement in the economic data. In order to be prepared for a bear surprise on the bond market, he preferred bets on decreasing real interest rates in the 30th area.

The Strategists of Barclays Bank PLC are now pessimistic and calling on the increase in vaccinations, a decreasing pigeon view of central banks and a changing emission dynamics. You prefer to go over interest rate swords.

NATWEST Markets Strategist Giles Gale explained in an analysis that inflation expectations in Europe are likely to increase, which speak for higher returns.

Longer terms are most vulnerable in relation to yield extensions elsewhere in the spectrum, so Gale. The interest of the ECB to keep interest on the long end in bridle should be limited. Natwest recommends selling 30-year-old federal government over US Treasuries.

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Bond Strategists Recommend Shorting Bunds Ahead of ECB Meeting

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