2023-06-23 11:04:27
More and more bond investors are betting on a deep recession in Germany. Bond yields have been pointing towards this for about a year, but on Friday they were as clear as they had been in 1992 stronger economic slump follows,” said Commerzbank investment strategist Christoph Rieger.
Investors are therefore primarily throwing shorter-dated bonds out of their portfolios. This drives up their returns. Two-year Bunds are yielding around 3.3 percent, just below the level of autumn 2008. Ten-year bonds, on the other hand, are yielding around 2.4 percent.
Experts speak of an “inverse yield curve” here, because shorter-dated securities usually pay lower interest than long-dated securities. The much-noticed yield gap – known in technical jargon as the spread – between two- and ten-year Bunds has been inverted since August 2022, but this trend has intensified in recent weeks. At 0.815 percentage points, the spread on Friday marked its highest level in three decades.
The German economy shrank slightly in each of the past two quarters, thereby fulfilling the commonly accepted definition of a recession. Because of a surprising decline in incoming orders for German industry, economists are also pessimistic for the current quarter.
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