Despite the elements of surprise in yesterday’s general elections in Germany, most analysts and economists believe the overall impact on the financial markets will be limited in the short and medium-term. But with the status quo of the Grand Coalition no longer available, there will now be a period of uncertainty.
Currently, even yields on European high-yield bonds are below equity dividend yields, making investment in stocks a better way of generating income. For US bonds, the focus is on the Fed’s planned balance sheet normalisation.
Julius Baer Research | Bond yields in the US will likely consolidate thanks to the cap of yields in Europe, as the region is not the next eye of the storm, but the anchor for stability on global bond markets. In the short-and medium term, the ECB’s next move is more important than the Fed’s for bond investors globally.