Julius Baer: sobre los bonos en euros y el paladio

Redacción - Jueves, 26 de Enero

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FIXED INCOME EUR bonds - upward drift of government bond yields – prefer bank debt Government bond yields continue to drift higher, with the yield on the German 10-year government bond getting close to 0.5% this morning, up from 0.2% at the beginning of the year and its all-time low of -0.2% in July last year. This translates into a loss of more than 4% for those having bought the bond in the aftermath of the Brexit vote. Bond yields are drifting higher not only as incoming economic data paints a rosy picture, but also in anticipation of higher US interest rates and lower purchases of the European Central Bank (ECB). With inflation rising towards the ECB’s target of “close but below 2%”, there are simply no arguments to believe that it will continue its asset purchase programme forever. The biggest room for correction is for assets that benefited most from the ECB’s purchases, i.e. government bonds and non-financial corporate bonds. Bank bonds have not been touched by the ECB and are less distorted. Moreover, bank debt will benefit from the improving economic outlook that translates into better asset quality of the issuer.

 

Markus Allenspach, Head Fixed Income Research, Julius Baer

 

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COMMODITIES

 

Palladium: Hit by profit-taking

 

Palladium once again proved that it is among the most volatile commodities. After rallying earlier this month prices dropped more than 7% yesterday, suffering the biggest sell-off in more than five years. There was no fundamental trigger to pinpoint, leaving profit-taking in the futures market as the most likely explanation. Futures market positioning had become excessively bullish as of late and failed to reflect the weakening fundamental backdrop. Palladium is mainly used in catalysts of gasoline fuelled cars and following very strong sales last year, a short-term slowdown is looming. This is mainly due to cutbacks of subsidies in China, which should result in lower sales over the coming months after consumers pulled forward purchases. Furthermore, we only see limited upside for car sales in the United States as the market is saturated and the economy close to full employment.

Following the recent rally, palladium was hit by profit-taking in the futures market, triggering a 7% sell-off.

 

Carsten Menke, Commodities Research Analyst, Julius Baer

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