Analysts Call End to Era of Negative-Yielding German Bunds

  • No calls for 10-year yields below zero out to end-2018
  • Lower yield trend ‘bottoming out,’ says DZ Bank’s Reicherter

The era of negative yields on bunds may have finally run its course, according to a Bloomberg survey of economists.

Benchmark German 10-year bond yield climbed to the highest since January last week, having dropped to a record low in July. For the first time since March, there are no calls in the monthly poll for the yields to fall below zero in the forecast horizon through 2018.

With talk of reflation spreading across developed economies and the European Central Bank slowing its monthly asset purchases, which some perceive as an unwinding of its stimulus program, yields are seen moving higher in coming quarters, ending 2017 at 0.60 percent, compared with 0.40 percent on Monday.

“When you compare it to the last year or the last few months, we had a continued trend to lower yields and now it’s bottoming out,” said Christian Reicherter, a Frankfurt-based analyst at DZ Bank AG. “It’s a new scenario for investors, that’s for sure.”

For full survey results, click here.

While predictions have risen almost across the survey period when compared to the previous poll, the increase is predicted to be gradual, with a median forecast of 1 percent on the 10-year bund seen only by the end of 2018.

“It’s a moderate increase,” said DZ’s Reicherter. When the central bank stops buying bonds altogether “we could see a much sharper increase of bond yields, but because of the ongoing bond-buying of the ECB we see a moderate move higher.”

  • There were a total of 24 respondents to the survey.
  • The median prediction for the end of this year is 0.25 percent.
  • While ECB President Mario Draghi said tapering was not discussed at the policy meeting on Dec. 8, reducing the monthly purchases to 60 billion euros from 80 billion euros weighed on longer-dated bonds.
  • German 10-year yields fell below zero for the first time on record before Britain’s European Union referendum in June, and reached minus 0.205 percent in the aftermath of the nation’s decision to leave.
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