Sovereign bonds increase their profitability in the secondary market, but not with the same intensity. The US debt is among the most volatile in recent weeks, as is logical after the electoral outcome of November 5. He Ten-year US bond exceeds 4.45%while European titles are tightening at a slower speed. As an example, the Spanish ten-year bond It is listed with a 3.08% profitability. That is, the difference with the US bond exceeds 135 basis points, which implies seeing the greatest distance between both references since April 2021.
The performance of bonds in the secondary market is, among other things, a reflection of investors’ risk aversion to these assets. And, for now, it is the US economy that is capturing the market’s attention due to the future that is being drawn in the United States and the consequences it will have on the rest of the world. The risk premium between the United States and Spain (differential between the yield of their ten-year bonds) shoots to highs in almost four years because an environment of greater uncertainty for the United States and higher interest rates after Donald Trump’s victory is discounted.
“The Trump administration’s policies are likely to be more inflationary,” said Schroders manager Alex Monk. “Treasury bond yields [de EEUU] have risen across the curve amid expectations for an extension of the cuts in taxes, higher tariffs and stricter immigration that imply a higher term premium,” added Barclays analyst Anshul Pradhan.
Since last November 5, election day in the United States, the ten-year US bond has risen almost 20 basis points while European bonds have cut their profitability between three and six points in the same period. But not all the debt of the Old Continent will move in unison in 2024. Although it is the debt of peripheral countries that responds most sensitively, historically, to any negative news for the eurozone, in recent months this has not been the case. The Spanish risk premium compared to the German one It stands at 70 basis points with the German bond at 2.39%. It is not the lowest level of the year, given that this differential fell below 70 points in October, but it is far from the levels with which the year started, which implied a risk premium of 96 basis points.
That the Spanish debt reacts with less virulence than the German one, in addition to the North American one, also responds to current German politics. “Trump’s victory in the US elections comes at the worst possible time for Germany, adding more uncertainty about its battered economy“, commented the Generali AM analyst, Martin Wolburg, in relation to the breakup of the tripartite coalition in Germany that will lead to early elections on February 23. One of the points that are now up in the air in the country are the budgets general 2025 and the debt limit.
Although Spain also has its budgets for next year in the negotiation phase, it is French policy that attracts the attention of analysts with greater intensity after the German case. “We observe that the sustainability of the French public debt will continue to be a cause for concern. It could lead to a further widening of peripheral government bond yield spreads and weigh on the euro,” commented J. Safra Sarasin Sustainable AM currency strategist Claudio Wewel.
On the other hand, the profitability of Spanish debt is also rising at a slower speed than that of the United Kingdom. The ten-year British sovereign bond exceeds the American one by touching 4.5%. This implies that the risk premium between both debt securities is at historic highs since there is record, 1997 according to Bloomberg. And, again, it is the evolution of the national debt relative to the evolution of gross domestic product in the United Kingdom that worries investors. “It is plausible that part of the slowdown [económica] was due to the high uncertainty at the time, as businesses and households speculated about possible fiscal changes ahead of the budgets,” said abrdn chief economist Luke Bartholomew.
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