“Yields are expected to stay low in Germany for a very long time,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “You have the ECB easing and pretty low growth. Yield levels are low but that’s what you have to buy.”
Even with yields below 1%, the income generated from German bunds is a fare more attractive alternative to the negative rates for parking money with the ECB. Anticipating further ECB easing, traders dived into European fixed-income assets this year, pushing German bund prices highers and yields lower.
“The renewed low 10-year Bund yield is no surprise, given low growth and inflation expectations,” Ruediger Kerth, portfolio manager for European government bonds at Union Investment, said in a Wall Street Journal article. “The ECB is likely to continue its accommodative monetary policy and accompanying measures to spur growth.”
According to Eurozone data, inflation declined to an annual rate of 0.3% in September, a five-year low and below the ECB’s target of just under 2%.
PowerShares DB German Bond Futures ETN
