Risk appetite and investor optimism on the financial markets are back with rallying stock markets and narrowing credit spreads following a setback in September.
With such sentiment, one would normally expect long yields to start an upward trajectory, says Chief Analyst at Danske Bank, Arne Lohmann Rasmussen. Instead yields on long dated European bonds have been falling, despite a slight uptick in the US.
”The modest increase in US long yields has had little effect on European yields. The 10-year Bund yield has moved below -0.60% in October - the lowest level since March, says Chief Analyst at Danske Bank, Arne Lohmann Rasmussen.
Fear of a second wave of COVID-19
Expansive bond buying operations by the European Central Bank has helped drive European yields lower but concerns of a major second wave of COVID-19 also weighs on sentiment with fears of lockdowns and restrictions as infection numbers move in the wrong direction.