EU Market Update 22/09/21
European Bonds Slip on Prospect of Inflation Hitting 2% By 2025
- According to unpublished ECB internal models, 2 percent inflation target is expected to be hit by 2025, implying a rate rise from record lows could happen as soon as late 2023, well before many economists expect
- As a result, the prospect of the European Central Bank lifting interest rates earlier than many analysts had expected hit eurozone bonds on Friday, increasing German borrowing costs to the highest in more than two months and decreasing Germany’s bond prices, pushing the country’s 10-year bond yield up by 0.03 percentage points to minus 0.27 percent, the highest since early July.
- Overall, a very sensitive inflationary outlook, as this comes at a time when current inflation numbers are rising and there’s more talk about inflation in general, definitely striking a chord with some investors and that’s what has driven the market move.
High Yields Tempt Wary Investors Back Into Turkish Debt
- According to recent news, a $2.25bn Turkish dollar bond sale occured this week attracting vigorous demand from investors across the UK, US and Europe
- This is the latest sign of how the country is beginning to lure back fund managers after severe ructions earlier this year with high returns that are elusive in many other markets, however some fund managers have had little choice but to go back due to Turkey weight in their benchmark indices (the less one invested, the more they underperformed)
- Overall an uncertain national outlook, as many remain deeply sceptical about the outlook for one of the world’s biggest emerging markets.
Eurozone Wages Fall For the First Time Since 2011, Easing Inflation Fears
- According to Eurostat (EU’s statistics arm) figures, labour costs in the eurozone have fallen for the first time in a decade, slipping 0.1 percent in the three months to June from a year ago despite rising consumer price inflation and falling unemployment.
- This slight drop in wages and non-wage costs runs contrary to fears that a recent acceleration in price growth and an improved labour market could feed into higher pay demands from workers.
- Overall, a neutral to upward wage level outlook, as wage growth is unlikely to remain as weak as the data suggests, but for now likely to remain fairly subdued due to spare capacity in the labour market
You’ve successfully subscribed to Finance Focused
Welcome back! You’ve successfully signed in.
Great! You’ve successfully signed up.
Your link has expired
Success! Check your email for magic link to sign-in.