Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

Germany's the odd one out in global bond markets. But it won't last. 

The 10-year U.S. Treasury yield has climbed 30 basis points in the past month, and the U.K. yield has risen nearly 40 basis points. But bund yields are up only 14 basis points.

Safety First
Catalan turmoil's keeping a lid on yields of German bonds, the ultimate European haven for the risk-averse
Source: Bloomberg

Blame the Catalans. The existential crisis there has put a cap on German yields, as demands for safety drive investors to the debt of Europe's superpower.

The broader picture is that global yields are headed higher. For one thing, the main buyer of European government bonds is packing up. The European Central Bank will probably decide on how to cut its bond-buying program at its Oct. 26 meeting. The choice of the next Federal Reserve chair is also spooking fixed-income markets, because the names swirling around as an alternative to Janet Yellen all look more hawkish. But even on the Yellen approach a new era beckons as Fed tapering beds down and another rate hike looms.

And risk is back. Since Spain's bond auction on Thursday, the nation's premium over Germany has tightened 18 basis points. Just 4 basis points of that is due to higher benchmark yields.

These factors have yet to have much effect on German debt. But there are a growing number of the more-influential rate strategists calling for German yields to rise. NatWest Markets and Deutsche Bank have recently reiterated their bearish bias, while Bill Gross and Jeff Gundlach are loudly describing bunds as the ultimate short.

On The Move
The big gain in U.S. Treasury yields in the past month has spurred a volatility pickup
Source: Bloomberg

These bear calls revolve around how much the ECB will cut purchases from the current 60 billion-euro ($70.7 billion) monthly total, and for how long this lower number will persist before it is cut yet again. Citigroup analysts reckon that for every 5 billion euros less in monthly QE purchases, 10 year bund yields will rise 5 basis points.

Of course the Catalan crisis could stop the risk revival in its tracks and drive peripheral spreads wider, particularly if the regional parliament does declare unilateral independence. And political worries continue to lurk, not least because of potential turmoil from Italian elections, which have to be held by the spring

Even leaving aside these natural sources of demand for Europe's bastion of safety, German yields should naturally follow international peers higher.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Marcus Ashworth in London at

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