European Sovereigns

10-year government bonds “ECB closely monitors rising sovereign yields”

Sovereign CDS spreads 5-year European sovereign CDS spreads (DE, NL and FR left, IT and ES right)

Sovereigns Europe - Market observation per 8 March 2021 -

Eurozone government bond yields decline sharply after ECB announcement

  • Early February ’21, global government bond yields increased on the back of expectations of new US fiscal stimulus. Prospects of a US support package boosted investors’ expectations of a fast economic recovery globally
  • European government bonds mirror development of US sovereign borrowing costs. Consequently, Germany’s 10-year bond yields reach the highest level in five months
  • The ECB responds to market developments and announces it is “closely monitoring” rising borrowing costs
  • Following this announcement, Germany’s 10-year bond yield fell 15%, to -0.3%, which is the sharpest decline since mid-December ’20
  • Find out more about the strategic implications of these ultra-low interest rates in our latest publication

Italy’s debut green bond receives strong investor demand

  • Italy issues a green bond of EUR 8.5bn, with a yield of 1.547% and maturity in 2045. The order book was 9.4x oversubscribed
  • Italy follows several European countries, amongst which France that has issued 11 green bonds since 2017
  • Green bonds often offer lower yields (so-called “greenium”) compared to traditional equivalents of the same issuer

The costs of insuring exposure to debt issued by European governments stabilizes further in Q1 ‘21

  • Italy’s credit default swap (CDS) fell sharply in January ’21, returning to pre COVID-19 levels
  • CDS spreads of the Netherlands, Spain and France have steadily returned to pre COVID-19 levels as well