Euro Rates Outlook – Bond yields past their lows

by: Kim Liu , Nick Kounis

  • We expect 10y Treasury yields to increase as the Fed will hike rates due to the sizeable impact of fiscal policy initiatives by President-elect Trump…
  • … but the eurozone economy will muddle through while core inflation will remain weak until the turn of 2017/2018
  • The ECB is expected to announce an QE extension by 6 months and to remove the floor for its purchases, while it will taper its QE programme in early 2018
  • German 10y bond yields will move higher especially in the latter part of 2017
  • Eurozone country spreads will drift wider due to a cocktail of diminishing impact of QE, taper speculation and political risks
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