Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

AMP'S THOUGHTS ON THE GILT MARKET

  • Comment
September saw a significant increase in European bond prices, driven especially by improved market sentiment toward...
September saw a significant increase in European bond prices, driven especially by improved market sentiment towards European Monetary Union.

Only a few months ago expectations were that EMU would consist of only a small number of core countries at the outset, with those European economies on the periphery joining just prior to the implementation of a single currency in 2002. Bond yields reflected this view with the 'ins' like France and Germany sustaining much higher bond prices (and lower yields) than the 'outs' such as Spain and Italy.

However, countries on the periphery of Europe have recently been encouraged by renewed political momentum on EMU and the possibility of a more liberal interpretation of the convergence criteria. For instance, the Italian government is now attempting to cut its budget deficit much more sharply in order to pass the convergence criteria in time to join EMU from the outset in 1999. Spain has similar hopes.

As a result bond spreads within Europe have narrowed significantly with high yielding markets such as Spain and Italy performing much better, and narrowing the spread with countries such as Germany. The UK, also a high yielder, has benefited from this general downward trend in bond yields, with the yield on 10 year bonds falling from around 8% during the Summer to its current level of around 7.5%.

Mhairi Mackelworth, AMP Asset Management.
  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.