“Germany’s new and more expansive fiscal position to fund the new European security realpolitik transforms the region’s bonds outlook. The yield curve has steepened but it can steepen further. Lodging at the front end of the curve is justified by the defensive nature of short-duration strategies, and continuing protection from the European Central Bank’s easing cycle. Europe Conscripts its Bond Markets: Germany’s lawmakers loosened fiscal rules to release defence funding from the country’s historic constitutional brake on spending and simultaneously announced an additional €500B for infrastructure renewal, in a transformational moment for Europe. The EU is also set to raise €150B in military development loans. There is nothing like an old-fashioned bit of fiscal stimulus to boost growth expectations — and European equities have benefitted enormously from the improvement in sentiment.”
Morten W. Langer
