March 31, 2021

Difficult times for EA sovereign bond investors

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In Short

Despite the adverse market environment euro area (EA) treasuries went through with their plans as scheduled in Q1 2021. As was already apparent after one month, EA treasuries were also very active on primary markets in this first quarter. Year-to-date they have issued around € 340 bn of sovereign debt.
Difficult times for EA sovereign bond investors
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Highlights:

 
  • Euro area sovereign treasurers have placed already more than 30% of the estimated annual sovereign bond issuance in Q1 2021.
  • The focus has remained on very long-dated bonds. Almost half of all newly issued sovereign bonds have a maturity of 10 years or more.
  • The ECB’s PEPP purchases were initially lower than expected and only recently the central bank has increased the volume. This, as well as the reflation trade and sharp UST sell-off, contributed to the worst total return in a first quarter for more than 30 years.
  • The technical situation will improve in the next quarter. Not only will the ECB buy more, but also the bond supply will decrease.

 

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Difficult times for EA sovereign bond investors
March 31st, 2021
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