This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
European bond yields are back in the news for all the wrong reasons. Dealers are concerned the rising borrowing costs for indebted European counties will drag the eurozone debt crisis back into the limelight. Today saw the start of a two-day hearing, in which the European Central Bank (ECB) was brought before the Constitutional Court of Germany. The central bank is under scrutiny because it purchased European government bonds during the debt crisis to try and boost confidence in the region. The lack of bad news over the past three months has helped push some equity markets to multi-year highs, and traders were looking for a reason to take some money out of the market. This court hearing has provided an excuse.
In the US, the Dow is down 0.5% as the worries in Europe are weighing on investor confidence. Jim O’Neill of Goldman Sachs stated we could see the yield on the US ten-year bond increase from below 2% to 4%. This could prompt investors to re-assess their bond holdings, and potentially take their cash out of US government bonds to buy equities, which currently have a higher yield.