At Any Rate
Global Rates: European rates market round-up
May 9, 2025
Aditya Chordia, a European Rates Strategist at JP Morgan, and Khagendra Gupta, also a European Rates Strategist there, dive into the nuances of the European rates markets. They discuss the intriguing impact of de-dollarization, shifting demand for Eurozone bonds, and the implications for German yields. The conversation also covers recent developments from the Bank of England, expected economic indicators, and interest rate decisions from the Riksbank and Norges Bank, shedding light on the current market landscape and investment strategies.
18:30
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Quick takeaways
- De-dollarization is gradually influencing European bond markets, potentially benefiting Germany and the EU as reserve managers diversify away from USD.
- The Bank of England's recent rate cut led to unexpected rising yields, indicating a cautious outlook and potential external influences on future economic conditions.
Deep dives
Impact of De-Dollarization on European Rates
De-dollarization is influencing European rate markets through potential diversification of bond holdings away from U.S. Treasuries. While there is minimal evidence of immediate selling flows towards European sovereign bonds, the gradual shift could benefit countries like Germany and the EU. Many reserve managers still hold a significant amount of USD, indicating a slow transition to other currencies. However, this diversification may relieve higher fiscal term premiums in German markets over time, as it enhances demand for euro-denominated assets.
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