ECB convenes for its initial meeting of the year with interest rates anticipated to remain steady

Shifts in European Bond Markets

European bond yield curves have become steeper recently. Short-term yields have risen slightly, reflecting brighter economic outlooks, while longer-term yields have increased as markets anticipate more government bond issuance, particularly from Germany.

We continue to hold a negative stance on German bonds, expecting that improved market confidence, supportive government spending, and greater bond supply may drive yields even higher. In contrast, we are wary of French bonds due to persistent political uncertainty.

Our preference lies with sovereign bonds from Italy, Spain, and Greece. These peripheral markets have demonstrated notable strength—Spain, for example, is profiting from reduced energy expenses, while Italy upholds prudent fiscal management.